Salatino v. Chase

• Decision Date: 31 August 2007
• Docket Number: No. 05-506.,No. 06-101.,05-506.,06-101.
• Citation: 939 A.2d 482,2007 VT 81
• Parties: Joseph SALATINO and Judith Salatino v. David S. CHASE, Brianne E. Chase and Vermont Associates in Ophthalmology.
• Court: Vermont Supreme Court

939 A.2d 482

2007 VT 81

Joseph SALATINO and Judith Salatino v. David S. CHASE, Brianne E. Chase and Vermont Associates in Ophthalmology.

No. 05-506.

No. 06-101.

Supreme Court of Vermont.

August 31, 2007.

Jacob B. Perkinson, James F. Conway, III and Stacey K. Porter of Johnson & Perkinson, South Burlington, Michael F. Hanley and Paul J. Perkins of Plante & Hanley, P.C., White River Junction, and John P. Maley and Christopher J. Maley

of Sylvester & Maley, Inc., Burlington, for Plaintiffs-Appellants/Cross-Appellees.

John D. Monahan, Jr. and Angela R. Clark of Dinse, Knapp & McAndrew, P.C., Burlington, for Defendants-Appellees/Cross-Appellants.

Present: REIBER, C.J., JOHNSON and SKOGLUND, JJ., and WESLEY, Supr. J. and MARTIN, Supr. J. (Ret.), Specially Assigned

REIBER, C.J.

¶ 1. In these consolidated appeals, plaintiffs Joseph and Judith Salatino appeal the trial court's denial of their motion to certify a limited-fund class action. Defendants David and Brianne Chase and Vermont Associates in Ophthamology appeal the court's order requiring notice of the certification decision to the putative class members, the content of the notice, and the manner of giving notice. Plaintiffs appeal the court's order allocating the costs of providing notice. Because plaintiffs did not establish the prerequisites for maintaining a limited-fund class action, we affirm the decision denying class certification. We reverse the superior court's decision to provide notice of the class-certification decision to putative class members. Because we hold that notice is not required, we do not reach defendants' claims regarding the content and manner of providing notice, nor do we consider plaintiffs' appeal of the cost-allocation order.

¶ 2. David Chase was a licensed ophthalmologist who ran Vermont Associates in Ophthamology with his wife Brianne Chase, a licensed optician. Dr. Chase was licensed in Vermont from 1968 until July 2003, when the Medical Practice Board suspended his license based on evidence that Dr. Chase had performed unnecessary cataract surgeries. In December 2003, the State requested that the Board revoke Dr. Chase's license on the basis that he had falsified patient records, pressured patients to have unnecessary cataract surgery, performed unnecessary surgeries, and engaged in other unprofessional conduct in the treatment of at least fourteen patients. Based on similar facts with respect to thirty-five patients, Dr. Chase was indicted by a federal grand jury on eighty-one criminal counts in September 2004. He was ultimately acquitted of all but two of the criminal counts. The United States of America, together with the State of Vermont, also filed a civil complaint against Dr. Chase in May 2005 for submitting false claims to federal and state health programs for at least thirty-three patients. That complaint was voluntarily dismissed without prejudice nine months later.

¶ 3. Plaintiffs were patients of Dr. Chase beginning in 1978. They commenced this action in July 2003, shortly after Dr. Chase's medical license was suspended. Plaintiffs' second amended complaint, filed in December 2003, included a class-action claim under the Vermont Consumer Fraud Act (CFA). 9 V.S.A. §§ 2451-2480n. Plaintiffs' initial complaint did not demand class certification. In March 2004, plaintiffs moved for class certification of the CFA claim under V.R.C.P. 23(b)(3), arguing that issues of fact and law common to the class predominated over individual questions. A year later, the court denied certification, finding that the CFA claim principally raised issues needing individualized proof. Consequently, the court found that common issues did not predominate, as the rule requires, and that allowing the action to proceed as a class action would not achieve judicial economy. Plaintiffs did not appeal that denial and did not move to notify putative class members of it.

¶ 4. Shortly after the court denied certification of the CFA claim under the predominance rule, plaintiffs moved to certify a limited-fund class for all of their claims, under V.R.C.P. 23(b)(1)(B). Those claims included the CFA claim and common-law claims of medical negligence, lack of informed consent, negligent misrepresentation, negligent supervision, battery, and intentional infliction of emotional distress. The court denied the limited-fund class-certification motion, holding that plaintiffs had not met three of the four prerequisites for maintaining a class action under Rule 23(a). The court held that plaintiffs had not established the size of the class because it was unclear whether the class comprised all of defendants' former patients or only those who received unnecessary cataract surgery. Citing the earlier order denying the predominance class certification for the CFA claim, the court also held that plaintiffs' medical-malpractice claim was not suited for class treatment because it would have to be established by examining "the individual circumstances of class member[s]." Further, the court held that plaintiffs had not shown that limited-fund class certification was proper under Rule 23(b)(1)(B), and that the named plaintiffs might be in conflict with other class members. Plaintiffs appealed from the denial.¹

¶ 5. Plaintiffs also moved for approval to provide notice of the denial to the putative class members. Plaintiffs argued that the media coverage of Dr. Chase's license suspension and the subsequent litigation against him caused absent putative class members to rely on the nascent class action to protect their legal interests. The superior court, citing "the court's obligation to safeguard the interests of absent class members," granted plaintiffs' motion and approved notice of the class-certification decision to putative class members under Rule 23(d)(2). The court reasoned that "the mere possibility that any of the media coverage surrounding Dr. Chase caused putative class members to rely on this suit suggests that notice is appropriate." In two later orders, the court established: (1) the content of the notice, (2) that notice would be given individually by first-class mail, and (3) that plaintiffs would bear the cost. Defendants appealed all three orders, contesting whether notice was appropriate at all, the manner of providing notice, and the content of the notice. Plaintiffs appealed the cost allocation. We first review the superior court's analysis of the suitability of limited-fund class certification.

I. The limited-fund class action

¶ 6. Our review of the class-certification decision has two aspects: we conduct a de novo review of the legal standards employed, and if the proper legal standards were used, we review the trial court's application of those standards for abuse of discretion. See Heerwagen v. Clear Channel Commc'ns, 435 F.3d 219, 225 (2d Cir.2006). Plaintiffs contend, citing Heerwagen, that "a denial of class certification is accorded noticeably less deference than . . . a grant of certification." We disagree with plaintiffs on this point, and decline to construe Vermont Rule 23 as the Second Circuit construed the analogous federal rule in that case.²

¶ 7. A mandatory class may be certified under Rule 23(b)(1)(B) when the prerequisites of Rule 23(a)—numerosity, commonality, typicality, and adequacy—are satisfied and

(1) the prosecution of separate actions by . . . individual members of the class would create a risk of

. . . .

(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.

V.R.C.P. 23(b).³ Vermont's rule mirrors the federal rule in every respect relevant here, see F.R.C.P. 23(b), and we therefore look to federal precedent to aid our interpretation of our rule.⁴

¶ 8. The U.S. Supreme Court has analyzed the federal limited-fund rule at some length in a recent case, Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999). The Ortiz Court noted that, although Rule 23(b)(1)(B) also encompasses several other varieties of class actions, "[o]ne recurring type of such suits was the limited fund class action, aggregating `claims . . . made by numerous persons against a fund insufficient to satisfy all claims.'" Id. at 834, 119 S.Ct. 2295 (quoting Advisory Committee Notes, F.R.C.P. 23). As the superior court noted in denying plaintiffs' motion for limited-fund class certification, the Ortiz Court identified three characteristics of cases appropriate for limited-fund treatment under the rule. Id. at 838-41, 119 S.Ct. 2295.

¶ 9. First, "the totals of the aggregated liquidated claims and the fund available for satisfying them, set definitely at their maximums, demonstrate the inadequacy of the fund to pay all the claims." Id. at 838, 119 S.Ct. 2295. This inadequacy is the sine qua non of a limited-fund class action; without a demonstration of insufficiency, binding absent class members would be unnecessary; the absent class members would be able to recover fully in separate actions. Id. at 838-39, 119 S.Ct. 2295; In re Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721, 739 (2d Cir.1992) (limited-fund class certification appropriate to avoid prejudice to those who file later, where fund likely to be exhausted by earlier filers). Courts have adopted two different standards to determine the inadequacy of an asserted limited fund: (1) "inescapable" risk of fund exhaustion, In re N. Dist. of Cal., Dalkon Shield IUD Prod. Liab. Litig., 693 F.2d 847, 851-52 (9th Cir.1982); and (2) "substantial probability," Trautz v. Weisman, 846 F.Supp. 1160, 1169 (S.D.N.Y.1994). The United States Supreme Court declined in Ortiz to decide which standard was appropriate because it determined that the Ortiz plaintiffs failed to meet either standard. 527 U.S. at 848 n. 26, 119 S.Ct. 2295.

¶ 10. "Second, the whole of the...