Matter of Skinner Group, Inc.

• Decision Date: 10 February 1997
• Docket Number: Bankruptcy No. N96-11349-WHD through N96-11380.
• Citation: 206 BR 252
• Parties: In the Matter of SKINNER GROUP, INC., et al., Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

206 B.R. 252 (1997)

In the Matter of SKINNER GROUP, INC., et al., Debtors.

Bankruptcy No. N96-11349-WHD through N96-11380.

United States Bankruptcy Court, N.D. Georgia, Newnan Division.

February 10, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Alfred S. Lurey, Dennis S. Meir, C. Ray Mullins, Kilparick & Cody, Atlanta, GA, for Debtors.

Gus H. Small, Small, White & Marani, Atlanta, GA, for Objecting Claimants.

Vivian D. Vines, Edmond & Vines, Birmingham, AL, for Settlement Class.

ORDER

W. HOMER DRAKE, JR., Bankruptcy Judge.

Now before the Court in this proceeding is the Motion for Orders (i) Making Federal Rule of Bankruptcy Procedure 7023 Applicable, (ii) Certifying Settlement Class and Sub-Classes, (iii) Granting Preliminary Approval of Class Settlement, (iv) Establishing Deadline for Opting Out of Class Settlement, (v) Setting Bar Date for Filing Proofs of Claim, and (vi) Approving the Form and Procedure for Providing Notice, as filed by Skinner Group, Inc., Skinner Corporation, and their respective subsidiaries (hereinafter collectively "the Debtors"). Having found the issues raised herein to generate a core proceeding, see 28 U.S.C. § 157(b)(2)(A) & (O), and having afforded all parties in interest an opportunity to be heard in the course of a January 30, 1997 hearing, the Court now shall dispose of the Debtors' Motion in accordance with the following reasoning.

FACTUAL BACKGROUND

The Debtors have, for many years, owned a chain of furniture stores within the Southeastern United States, the operation of which involves both cash sales and in-store financing. Though profitable as a general matter, the Debtors' operations recently have become overwhelmed by litigation, with individual and class action plaintiffs filing consumer actions against the Debtors in both state and federal court.¹ Thus, on May 10, 1996, the Debtors filed for Chapter 11 protection so as to resolve the litigation claims against them in a consolidated fashion.

The instant Motion lays the groundwork for such an omnibus settlement of all previously unasserted causes of action that consumers might hold against the Debtors, arising either from the sale of credit-life and disability insurance or the assessment of UCC-1 non-filing insurance charges. A pre-negotiated Settlement Agreement contemplates the certification of two settlement sub-classes, representing each of those respective litigation groups, but specifically excluding any claimants already named as parties in litigation. For parties not so excluded and not opting out of the settlement class, the Agreement proposes to set up a $1.5 million settlement fund to be distributed pro rata, after the payment of up to thirty percent in attorney's fees to the counsel for the class of tort claimants. The claims of excluded parties, i.e., those already suing in their own name, also are made a subject of contingency by the Settlement Agreement, in that the Agreement predicates itself upon the settlement of all such excluded claims for a sum not to exceed $150,000.² As such, through the combined effect of the Agreement's direct and indirect terms, the Debtors seek to remove all threat of litigation from some 200,000 consumers by giving each such aggrieved party a small, but certain, sum in satisfaction of their claim.

Framed against the backdrop of these provisions from the Settlement Agreement, the several components of the Debtors' Motion came before the Court in a January 30, 1997 hearing. Counsel for a group of excluded claimants, known familiarly as "the Macon County Plaintiffs,"³ then presented several bases of objection to the relief sought by the Debtors. Among their contentions, these objecting creditors submitted that they had no intention of settling for $150,000, as mandated by the Agreement's contingency provision. Thus, they reasoned, it would be futile either to certify the settlement class, as requested, or to approve the terms of settlement under consideration. Regarding the preliminary nature of the approval sought by the Debtors, the Macon County Plaintiffs also questioned the need for any such advance determination, suggesting instead that one final determination of both the class' certification and the settlement's approval would be more appropriate at the time of confirmation. Having afforded both the Macon County Plaintiffs and the Debtors an opportunity to address these matters fully, the Court took disposition of the Debtors' Motion under advisement for further consideration.

DISCUSSION

I. Federal Rule of Civil Procedure 23 in General Overview.

As composed, Federal Rule of Civil Procedure 23 breaks down into two essential components.⁴ First, subsection (a) presents a series of uniform requirements which every class action must meet. See FED.R.CIV.P. 23(a). Second, the various provisions of subsections (b)(1), (b)(2), and (b)(3) set forth the criteria for three distinct types of class action. See FED.R.CIV.P. 23(b). In order to receive "certification," or court approval to go forward, each class action must satisfy the general requirements of subsection (a), and it also must be shown to fall within one of the categories of action licensed by subsection (b). See id; see also Georgine v. Amchem Prods., Inc., 83 F.3d 610, 624 (3d Cir.1996) (citing Wetzel v. Liberty Mutual Ins. Co., 508 F.2d 239, 248 (3d Cir.), cert. denied, 421 U.S. 1011, 95 S.Ct. 2415, 44 L.Ed.2d 679 (1995)).

As its uniform standard for all class actions, Rule 23(a) states that no class action may proceed unless four basic criteria have been satisfied — numerosity, commonality, typicality, and representativeness.⁵ "Numerosity" speaks to the practicability of joining all members in the litigation in lieu of implementing the class action procedure. See FED.R.CIV.P. 23(a)(1). It frequently is said that attending circumstances dictate the existence of "numerosity," rather than the mere satisfaction of some arbitrarily numeric formulae. See, e.g., Garcia v. Gloor, 609 F.2d 156, 160 (5th Cir.1980); Liberty Lincoln Mercury, Inc. v. Ford Mktg. Corp., 149 F.R.D. 65, 73 (D.N.J.1993) (considering the totality of facts when applying Rule 23(a)(1)). Thus, as the Rule itself suggests, the "numerous" character of any action turns upon concepts of general unwieldiness, not size alone. Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir.1993) (movant need only show that joinder of prospective members would cause inconvenience); Kelley v. Norfolk & W. Ry. Co., 584 F.2d 34, 35-36 (4th Cir.1978) (courts must focus on both qualitative and quantitative considerations).

"Commonality," on the other hand, looks to the degree of overlap between the claims of various class members. See FED. R.CIV.P. 23(a)(2). Virtual identity need not exist between claimants in order for the commonality prong to be satisfied, see Cox v. American Cast Iron Pipe Co., 784 F.2d 1546, 1557 (11th Cir.1985), cert. denied 479 U.S. 883, 107 S.Ct. 274, 93 L.Ed.2d 250 (1986); Weiss v. York Hosp., 745 F.2d 786, 809 (3d Cir.1984), cert. denied, 470 U.S. 1060, 105 S.Ct. 1777, 84 L.Ed.2d 836 (1985), and courts generally have employed a flexible reading of Rule 23(a)(2). See, e.g., Eisen v. Carlisle & Jacquelin 391 F.2d 555, 563 (2d Cir.1968), rev'd on other grounds, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); Goldwater v. Alston & Bird, 116 F.R.D. 342, 347 (D.Ill. 1987). Nevertheless, the movant for certification must adduce more than one issue of fact or law that the prospective claimants share between themselves before a class may be certified. 7A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 1763 (2d ed. 1986) ("the use of the plural `questions' suggests that more than one issue of law or fact must be common").

In a similar fashion,⁶ Rule 23(a)'s "typicality" requirement "focuses on the similarity between the named plaintiffs' legal and remedial theories and the legal and remedial theories of those whom they purport to represent." Flanagan v. Ahearn (In re Asbestos Litigation), 90 F.3d 963, 976 (5th Cir.1996) (citing Jenkins v. Raymark Indus. Inc., 782 F.2d 468, 472 (5th Cir.1986)). Thus, shortcomings in typicality will preclude certification when the representative litigant has a claim against a defendant unrelated to the party against whom the class members seek recovery, or when he seeks to recover on a legal theory unlike that relied upon by the class. General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982); La Mar v. H & B Novelty & Loan Co. 489 F.2d 461, 465 (9th Cir.1973).

Finally, Rule 23(a) requires that the representative parties "fairly and accurately protect the interests of the class." See FED.R.CIV.P. 23(a)(4). The adequacy of representation inquiry has two components designed to ensure that absentees' interests are fully insured.⁷ First, the interests of the named plaintiffs must be sufficiently aligned with those of the absentees. Reed v. Bowen, 849 F.2d 1307, 1313 (10th Cir.1988); Greenhaw v. Lubbock County Beverage Ass'n, 721 F.2d 1019, 1024 (5th Cir.1983); Modell v. Eliot Sav. Bank, 139 F.R.D. 17, 23 (D.Mass. 1991).⁸ Second, class counsel must be qualified and must serve the interests of the entire class. See Andrews v. American Telephone & Telegraph Co., 95 F.3d 1014, 1022 (11th Cir.1996); In re American Medical Systems, Inc., 75 F.3d 1069, 1082 (6th Cir. 1996) ("adequacy of representation" means that the class representative shares the interests of the unnamed members and that he will vigorously prosecute those concerns through qualified counsel).

Beyond these four general standards of Rule 23(a), each class suit also must meet the criteria for one of three class action types listed respectively in subsections (b)(1), (b)(2), and (b)(3) of Rule 23.⁹ Since the parties to this case have stated an intention to proceed under the third action type, known simply as the "(b)(3)" action, that additional burden will require...