Sta-Power Industries, Inc. v. Avant

• Citation: 216 S.E.2d 897,134 Ga.App. 952
• Decision Date: 02 May 1975
• Docket Number: STA-POWER,No. 2,Nos. 50326,50327,s. 50326,2
• Parties: , Blue Sky L. Rep. P 71,206 INDUSTRIES, INC., et al. v. J. P. AVANT et al. R. R. NOCERA et al. v. J. P. AVANT et al
• Court: United States Court of Appeals (Georgia)

Page 897

216 S.E.2d 897

134 Ga.App. 952, Blue Sky L. Rep. P 71,206

STA-POWER INDUSTRIES, INC., et al. v. J. P. AVANT et al.

R. R. NOCERA et al. v. J. P. AVANT et al.

Nos. 50326, 50327.

Court of Appeals of Georgia, Division No. 2.

May 2, 1975.

Rehearing Denied June 5, 1975.

Syllabus by the Court

1. Where common questions of law and fact predominate, the action is on behalf of purchasers from a common source, and common relief is sought, a class action suit under Code Ann. § 81A-123 is authorized.

2. A court order imposing authorized sanction of default judgment is not fatally defective if it does not contain a recitation of wilful misconduct where there is an adequate showing of a failure to comply with a court order which equates to wilful misconduct.

3. In a class action under Code Ann. § 81A-123, where discovery of all persons in the class is unduly delayed by failure of the defendant to comply fully with an order of the court for discovery, addition of intervenor plaintiffs, after imposition of authorized sanction of default judgment, is authorized in the discretion of the trial court.

Roberts O. Bennett, Ben F. Johnson, III, Atlanta, for Sta-Power Industries, Inc., and other appellants.

Alston, Miller & Gaines, Ben F. Johnson, III, Atlanta, for R. R. Nocera, and other appellants.

Murray Z. Kahn, John A. Ford, Atlanta, for appellees.

QUILLIAN, Judge.

This is an appeal by defendants from an order of the trial court determining this action is maintainable as a 'class action' under Code Ann. § 81A-123. Defendants Nocera, Alexander, and Skvaril separately appeal from an order titled 'Judgment as to Liability' entered against them by the court in response to a motion by plaintiffs for imposition of sanctions for failure of these particular defendants to comply with an order of the court compelling them to answer, on or before March 12, 1974, interrogatories served on each of them November 21, 1973.

Defendants Nocera, Alexander, and Skvaril have combined their briefs as to a companion case, Nocera et al. v. Avant, (50327), and we shall do the same with our decision. After imposition of default judgment against defendants Nocera, Alexander, and Skvaril, on May 29, 1974, for failing to answer interrogatories and to comply with an order of the court compelling them to answer, and thereafter overruling a motion to vacate or revoke judgment, the court issued an order on October 14, 1974, permitting the addition of nine intervenor plaintiffs. Defendants Nocera, Alexander, and Skvaril appeal from this order permitting addition of plaintiffs after judgment as to liability. Held:

1. Plaintiff's complaint alleges that these nonresident defendant corporations and their officers were selling, in Georgia, 'distributorship agreements to the Plaintiffs and numerous other persons in violation of Georgia Code Sections 97-102(i) and 97-104.' Their affidavit contended defendants violated the Georgia Securities Act 'by selling unregistered securities . . . the distributor agreements. . . .' which constituted 'a 'pyramiding' scheme' whereby purchasers of certain distributorships received compensation for recruiting other distributors who were required to maintain minimum inventory levels, pay training fees, monthly dues, and other charges. Defendants assert that this type action is not appropriate under Code Ann. § 81A-123 as a 'class action' because: (1) the alleged class is insufficiently numerous as to require representation by class action plaintiffs; (2) antagonism or divergence of interests exists among plaintiffs; (3) common questions of law do not predominate; and (4) the claims are not 'several . . . which do or may affect specific property involved in the action.'

Since there are only a few definitive holdings in Georgia on this particular section of the Civil Practice Act, we also look to federal cases to aid us. Harper v. DeFreitas, 117 Ga.App. 236, 160 S.E.2d 260. Although defendants denied their acts violated the Georgia securities law, in determining the propriety of a class action, the first issue to be resolved is not whether the plaintiffs have stated a cause of action or may ultimately prevail on the merits but whether the requirements of Code Ann. § 81A-123(a) have been met. Eisen v. Carlisle and Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). We find those requisites have been established. Our statute permits one or more persons, as will fairly insure adequate representation of all of the class, may sue when the character of the right to be enforced is joint, or common, or several if the claims affect specific property involved in the action. A secondary right of action, which is permissible as a class action, is not relevant to this case.

Plaintiffs contend the distributorships purchased by them are 'unregistered securities' which were executed on a 'standard printed form.' A class action on behalf of purchasers of securities alleged to have been defrauded by a common course of dealing on the part of the defendants satisfies the requisites of Rule 23(a) (Code Ann. § 81A-123(a)). Harris v. Palm Springs Alpine Estates, 329 F.2d 909 (9th Cir. 1964). See also Green v. Wolf Corp., 406 F.2d 291 (2d Cir. 1968). Cases involving franchises have been approved as class actions where the same licensing agreement was used. McMackin v. Schwinn Bicycle Co., 16 F.R.Serv.2d 1005 (1972); Siegal v. Chicken Delight, Inc., 271 F.Supp. 722 (N.D.Cal.1967). Courts have also held that actions on behalf of defrauded securities purchasers present a particularly desirable situation for a class action. Dolgow v. Anderson, 43 F.R.D. 472 (E.D.N.Y.1968). Common questions of law and fact predominate, as in the instant case, when action is brought on behalf of purchasers of agreements from a common source, the character of the right sought to be enforced is common, and common relief is sought. Georgia Investment Co. v. Norman, 229 Ga. 160, 190 S.E.2d 48; McMackin v. Schwinn Bicycle Co., supra. Minor variations in amount of damages, or location within the state, does not destroy the class when the legal issues are common. Gaines v. Budget Rent-A-Car of America, 16 F.R.Serv.2d 60 (1972). Defendant's objection to the size of the class is not meritorious. They have provided the court with the names of 253 persons within the State of Georgia who purchased distributor agreements from Sta-Power. Class actions have been approved by courts involving as few as 25 (Philadelphia Elec. Co. v. Anaconda Am. Brass Co., 43 F.R.D. 452 (E.D.Pa.1968)); 35 (Fidelis Corp. v. Litton Ind., Inc., 293 F.Supp. 164 (S.D.N.Y.1968)); and 40 (Swanson v. American Consumer Industries, Inc., 415 F.2d 1326 (7th Cir. 1969)) persons in the class. We find that the class is sufficiently numerous as to make it impractical to bring them all before the court, that the common questions of law and fact predominate over the issues as to any individual, that there are no major antagonistic or divergent interests, and the claims of the class are directed in part toward specific property of defendants in the possession of the class as a whole as a result of compliance with the distributor agreements. Succinctly stated, this action is properly placed under Code Ann. § 81A-123.

2. Defendants Nocera, Alexander and Skvaril, separately appeal from an order imposing 'Judgment As To Liability' as a sanction for their failure to answer interrogatories served upon them by mail, in California, on November 21, 1973, and their failure to comply with an order of the court, dated February 15, 1974, compelling them to answer the same interrogatories on or before March 12, 1974. The order imposing the authorized sanction of default judgment was entered, after a hearing, on May 29, 1974. Defendants were officers of Sta-Power-the Chairman of the Board, President and the person 'in charge of the legal department,' respectively. Suit had been instituted on March 23, 1973 and defendants Nocera and Alexander terminated their connection with Sta-Power in July, 1973 and defendant Skvaril was discharged December 10, 1973-after receipt of the interrogatories. All defendants had been served personally with original service in April, 1973. Counsel for defendants in Georgia had withdrawn on July 27, 1973 and local counsel did not make another appearance until December 3, 1973 but their notice to the court was dated November 30, 1973-the date counsel for plaintiffs stated in an affidavit filed with the court that he 'reviewed all discovery actions with Mr. S. . . . (new counsel for defendants) and told him about the delinquency of Sta-Power with respect to non-compliance with the Court Orders.' Defendants Nocera and Alexander claim that they were not advised of these interrogatories until June 1, 1974. They stated that the California counsel for Sta-Power was aware of their address but they were never notified of these developments.

Defendants appeal on three grounds as to this enumeration of error: (1) the ultimate sanction of default judgment cannot be invoked except in the most flagrant cases where the failure is wilful, in bad faith, or in conscious disregard of an order; (2) the judge made no specific finding of wilfulness in his order, and (3) if he had done so it would have been an abuse of discretion. These defendants were personally served with notice of this suit. They had California and Georgia counsel. Although they were without local counsel when these interrogatories were mailed to the address filed by their counsel with the trial court, local counsel were acting in a representative capacity within 10 days after the interrogatories were mailed, and throughout the remainder of the 30 day statutory period to answer the interrogatories, the motion to compel answers, and the hearing imposing sanctions.

A defendant is under a duty to keep in touch with his attorney so that he can answer interrogatories or take any other action his attorney might find necessary pending...