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Linda S. Mullenix

One of the hottest, most compelling and unresolved issues in class action litigation involves the problem of claim abandonment. This issue implicates pleading, certification, claim splitting, res judicata and adequacy problems. The basic questions are: During the development of a class action, may an attorney abandon claims with impunity? What consequences, if any, does this action have for the res judicata effect of a class judgment? Does claim abandonment bear on the adequacy of representation? As will be seen, courts have different answers to these questions. Class counsel’s plea generates abandonment At the outset, the problem of claim abandonment is generated by the way class counsel plead the causes of action and remedies in the class complaint. In modern class action litigation, class counsel usually plead multiple causes of action and remedies, including tortious injury, breach of contract, injuries to property and business interests, constitutional and statutory violations, unjust enrichment, restitution, equitable conversion, money had and received and so on. It is not uncommon for a class complaint to contain a half-dozen to a dozen or more claims and remedies. Moreover, it is not uncommon for a complaint’s prayer for relief to ask the court for compensatory damages, a declaratory judgment, injunctive relief, restitution, exemplary or punitive damages, attorney fees, costs and any other relief to which the court believes the class is entitled. Class counsel also may seek to certify these various claims and remedies under different provisions of the class action rule, including the mandatory non-opt classes pursuant to Rule 23(b)(1)(A), (b)(1)(B) or (b)(2), or the opt-out class provision, pursuant to Rule 23(b)(3). However, as class litigation develops and attorneys discover information relating to class certification issues, class counsel often amend their original complaint to redefine the class, to drop various claims or remedies or to reconfigure the Rule 23(b) categories under which the class seeks certification. It is not unusual for a class complaint to be amended several times prior to the motion for class certification, and for class counsel to abandon multiple claims or to change opt-out classes in favor of mandatory classes or vice versa. May class counsel simply abandon legal claims and remedies through successive amended class complaints? If the class representatives engage in such strategic behavior, will the abandonment of previously pleaded claims have a res judicata effect against class members bound by a class judgment obtained on a narrower set of legal theories (or remedies)? Will the class judgment prevent class members subsequently from pursuing litigation on the abandoned claims? Furthermore, does the strategic repleading of a complaint to eliminate claims, remedies or class membership have bearing on the adequacy of class counsel? Courts are of different views regarding artful pleading, claim splitting, res judicata and adequacy implications. See, generally, 18A Wright, Miller & Cooper, Federal Practice and Procedure � 4455. Even within one jurisdiction, courts currently disagree about the seriousness and legal consequences of claim abandonment during the development of a class action. See, e.g., Phillips Petroleum Co. v. Bowden, 108 S.W.3d 385 (Texas App.-Houston [14th Dist.] 2003); Citizens Ins. Co. of America v. Daccach, 105 S.W.3d 712 (Texas App.-Austin 2003, pet. filed); Compaq Computer Corp. v. LaPray, 79 S.W.3d 779, 793 (Texas App.-Beaumont 2002, pet. filed); Microsoft Corp. v. Manning, 914 S.W.2d 602, 610-611 (Texas App.-Texarkana 1995, writ dism’d). Some courts have held that the voluntary relinquishment of claims throughout the development of a class action will not have a subsequent preclusive effect on class members who wish to pursue independent litigation on those claims. Marshall v. Kirkland, 602 F.2d 1282, 1298 (8th Cir. 1979). This conclusion is loosely based on the notion that class action litigation is somehow different from ordinary litigation, and therefore ordinary rules of preclusion doctrine do not apply to the class action context. Moreover, some courts have noted that under usual preclusion principles, the issuing (or original) court cannot determine the res judicata scope and effects of its own judgments. Therefore, at the time of a class certification, a court is not in any position to make a guess about the possible res judicata effects that a second court might accord to a class action judgment that would result from the actual trial of a certified class. In addition, some courts have noted that it is not unusual for class complaints to change over time, as a consequence of discovery. In this view, class complaints are, of necessity, fluid and changeable documents. Therefore, when class counsel have determined that certain types of claims are not feasible or could not possibly be certified under prevailing legal principles (for example, a proposed nationwide mass tort claim), it is rational, if not required, for class counsel to abandon such claims that were pleaded in the original complaint. See Citizens Ins. Co., 105 S.W.3d at 725; Compaq Computer, 79 S.W.3d at 793 (holding that in a class action, splitting claims may be appropriate); see also Microsoft v. Manning, 914 S.W.2d 602, 610-611 (Texas App.-Texarkana 1995, writ dism’d). In this view, it is unfair to penalize the class representatives for eliminating claims that counsel understands the court will not certify. Moreover, some courts have suggested that res judicata preclusion applies only to claims that “could have, or should have” been litigated in the first action. Thus, if a claim feasibly could not have been certified for class treatment, those claims should not be barred by res judicata principles. Other courts have indicated, on the contrary, that claim abandonment during the development of a class complaint is impermissible and fatal to class certification, and also bears on the adequacy of representation. These courts largely proceed on the theory that class action litigation does not exist in some alternative procedural (or substantive) universe, and that the ordinary principles of res judicata apply in the class action context as well as the ordinary litigation context. See Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 875 (1984) (the “[b]asic principles of res judicata (merger and bar or claim preclusion) and collateral estoppel (issue preclusion) apply [to class actions]” and Phillips Petroleum Co., 108 S.W.3d at 404 (“Although a class action may be maintained with respect to particular issues ‘when appropriate,’ [the class action rule] is not meant to be an exception to res judicata”). In this view, ordinary principles of res judicata require a plaintiff to plead all claims that could have or should have been pleaded in the original action. A judgment in a first action serves to merge all claims with the judgment; the doctrines of merger and bar will preclude litigants who subsequently seek to litigate other claims that were not pleaded in the original action. See e.g., Haas v. Howard, 579 F.2d 654, 657 (1st Cir. 1978); Nichols v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 821 F. Supp. 1254, 1258 (M.D. Tenn. 1992). As every first-year law student knows, the scope of preclusion is primarily measured by a transactional standard that looks to the events or series of events giving rise to the action. Thus, when class counsel originally plead multiple claims, legal theories and remedies based on an event or series of events, but then strategically abandon several theories, the complaint itself bears evidence of claim splitting. No court is left to guess about what other theories could have or should have been brought in the original action, because class counsel actually pleaded but subsequently abandoned them. In addition, courts have found the claim-abandonment problem particularly exacerbated where class counsel amend a complaint to reformulate Rule 23(b)(3) opt-out classes as mandatory (b)(1) or (b)(2) classes. In the mandatory classes, claimants will not receive notice of the pending action nor have the opportunity to exclude themselves from the class. In such situations, courts have viewed the peril of a subsequent res judicata bar as an extreme penalty on class members who will be bound by the class judgment and potentially estopped from being able to pursue claims that their class representatives dropped from the complaint. Some courts bring in adequacy implications Some courts have determined that not only does claim abandonment defeat class certification, but that it renders the class representatives who engaged in such conduct inadequate to represent the class. See Phillips Petroleum Co., 108 S.W.3d at 404; Millett v. Atlantic Richfield Co., 2000 WL 359979, 9 (Maine Super. Ct. March 2, 2000), appeal dism’d, 760 A.2d 250 (Maine 2000); Zachery v. Texaco Exploration & Prod. Inc., 185 F.R.D. 230, 243-45 (W.D. Texas 1999); Pearl v. Allied Corp., 102 F.R.D. 921, 923 (E.D. Pa. 1984). In Phillips, an oil and gas royalty case, class counsel repleaded the complaint to abandon certain breach of contract claims that would have made satisfaction of the certification-commonality requirement difficult. The court noted that the royalty owners had narrowly crafted their breach of implied and express covenants in an attempt to satisfy the requirements for class certification. The court held that “the result of such crafting is that other potential breach of contract claims will be precluded by res judicata.” Id. More significantly, the court held the representatives inadequate to represent the class, and reversed the trial court’s class certification order. “We conclude that the trial court’s class certification order impermissibly splits claims for breach of the lease agreements. Moreover, given the willingness of the class representatives to abandon claims for the sake of achieving commonality, we conclude they cannot adequately represent the three subclasses and the trial court abused its discretion in certifying the class action.” Linda S. Mullenix holds the Morris and Rita Atlas Chair in Advocacy at the University of Texas School of Law. She is the author of State Class Actions: Practice and Procedure.

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