Rules of Professional Conduct When Engaging Witnesses

Perjury in Florida Federal Court by Judge Marra? It is now clear, Ocwen Altisource responses were also based on fear of further self-incrimination.


We’re super interested in this case from an rules of professional conduct and ethics by lawyers and had previously bookmarked this bumper of a case due to the fact it was a Bank and it’s attorneys acting above the law in a class action case which was eventually appealed to the 5th Cir.

LIT is now extremely interested in this case due to the recent unraveling of Goodwin Procter’s lies and deception in Georgia’s 11th Cir. and their illegal defense tactics in other litigation in Georgia and Illinois (there’s more related cases but those two are our focus at this time).

No. 83-8794

United States Court of Appeals, Eleventh Circuit

Kleiner v. First Nat. Bank of Atlanta

751 F.2d 1193 (11th Cir. 1985)

Decided Jan 31, 1985

No. 83-8794.

January 31, 1985.

1194 *1194

Trammell E. Vickery, Kent E. Mast, William B. Smith, Emmet J. Bondurant, II, Eugene G. Partain, W. Gordon Hamlin, Jr., Atlanta, Ga., for Hansell Post.

Robert B. Remar, Jerome J. Froelich, Jr., Kenneth P. McDuffie, Atlanta, Ga., Michael P. Malakoff, Pittsburgh, Pa., for plaintiff-appellee.

1196 Appeals from the United States District Court for the Northern District of Georgia. *1196

Before HILL, VANCE and ANDERSON, Circuit Judges.

1195 *1195

VANCE, Circuit Judge:

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.

1 619 F.2d 459 (5th Cir. 1980), aff’d, 452 U.S. 89, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981).


This appeal is the closing phase of a ground-breaking class action against the First National Bank of Atlanta2 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.

2. The Bank.

3. Kleiner and George Morosani, the second named plaintiff, charged that the Bank overcharged them in two distinct ways. First, the Bank allegedly tied their interest charges to the Bank’s announced prime rate rather than to some lower rate charged the Bank’s best commercial customers. Plaintiffs further complained that the Bank charged interest on the basis of a 360-day year rather than a 365-day year.

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

4. Rule 23(b)(3) authorizes certification of class actions in lawsuits where common questions of law or fact predominate and when no superior means of adjudication exists. Under the provisions of rule, potential class members have the option to withdraw from the class before trial on the merits. R.Civ.P. 23(c)(2)(A).

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.

5. The district judge remarked:

I am not really disturbed about the prospect of contacts in this case. I guess I am a little bit worried about all of you using up your time sitting at depositions . . . . why . . . wouldn’t it do just as well for the Bank to talk to these people, get affidavits if you want to. . . .

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.

1197 *1197

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.

6. The notice provided:

    1. Questions To Be Directed to Either Plaintiffs’ Counsel or Defendant’s Counsel

 Please address all inquiries you may wish to make about this action to either or both of the below listed persons:

(1) Plaintiffs’ counsel — Jerome Froelich, Jr., Suite 1500, 2 Peachtree Street, Atlanta, Georgia 30383;

(2) Bank’s counsel — Richard Kirby, Hansell Post, 3300 First Atlanta Tower, Atlanta, Georgia 30383.

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.

7. The initial proposal was crystallized in an August 3 Bank memorandum entitled “Game Plan for Kleiner Suit,” which began:

[H]aving examined the upcoming “solicitation to the affected classes” with the legal area, several communication targets seem important for action.

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.

8. Once counsel gave the go-ahead, the Bank saw little or no reason for restraint:

[T]he Bank perceived that sending a second, corrective notice would be a relatively innocuous remedy under the circumstances. Once loan officers had “put the finger” on their customers, a second notice would probably still yield extra opt-outs. In short, they considered it a “no-lose” situation.

Opinion of the district court at 27.

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 1198 notice and exclusion request forms *1198 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 “no facts beyond those listed in the Questions and Answers sheet, the letter to employees, and the class action notice………………… Chapman himself knew little about the lawsuit except what was contained in the materials distributed at the meeting.” 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.

9. The Bank tolerated no opposition to the communications When James Kilpatrick, a member of the Bar who was then a loan officer, objected to the use of pressure tactics to induce customers to opt out, he was told to follow the program or “find something else to do.” He was forced ultimately to resign when he refused to participate.

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 1199 Professional Conduct (1983).10 The court lodged additional charges against the Bank for violation of *1199

Local Rule 221.2 of the Northern District of Georgia.11

10. Model Rule 4.2 states:

Communication with Person Represented by Counsel

In representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so. Model Rule 8.4 provides in relevant part: Misconduct

It is professional misconduct for a lawyer to:

. . . .

(d) engage in conduct that is prejudicial to the administration of justice.

11. Local Rule 221.2 prohibited, in pertinent part:

221.23 solicitation by formal parties to class action of requests by class members to opt out in class actions under subparagraph (b)(3) of Rule 23 of the Federal Rules of Civil Procedure; and

221.24 communications, from counsel to a party, which may tend to misrepresent the status, purpose and effects of the action, and of actual or potential court orders therein, which may create impressions tending, without cause, to reflect adversely on any party, any counsel, the Court, or the administration of justice.

Following the October hearing, which lasted three days, the court issued an exhaustive order on November 8 declaring the solicitation scheme illegal. The trial court found that Kirby, Hansell Post, and Langway had rendered advice in bad faith and had knowingly taken part in the illegal opt-out campaign.

The court further found that the Bank had acted in bad faith and that the written briefing documents had contained misleading portrayals of fact.

As a sanction, the court imposed a $50,000 fine on Kirby and Hansell Post payable to the clerk of the court.

Kirby, his firm, and the Bank were additionally assessed attorneys’ fees and costs incident to class notice and the subsequent disciplinary proceeding, which totalled $58,577.

Both Kirby and Langway were disqualified from further representation in the case.12

As a final measure, the district court ruled that the exclusion requests would be voidable following entry of judgment.

The Bank, Langway, Kirby and Hansell Post immediately petitioned for review.

12. Langway was disqualified on the basis of his misleading testimony at the October hearing.


Since the date of argument before this court, the underlying litigation proceeded to settlement.13 Under the terms of the court-approved agreement, all qualifying class members who requested exclusion are entitled to void such requests and participate in the distribution of the settlement on equal footing with the remaining class members. The stipulation awarding attorneys’ fees by its terms encompasses the district court’s award of fees and costs incident to class notice and the disciplinary proceeding. The parties correctly argue that the settlement has mooted issues of attorneys’ fees, costs, and the legality of the voidable exclusion sanction. The issue of the injunction against communication with members of the plaintiff class similarly lapsed into mootness upon conclusion of the litigation. See Hammond Clock Co. v. Schiff, 293 U.S. 529, 55 S.Ct. 146, 79 L.Ed. 639 (1934); 13A C. Wright A. Miller, Federal Practice and Procedure, § 3533 at 271 (1975).

13. The entry of a final judgment settled the potentially thorny question of appellate jurisdiction over the appeals filed shortly after the imposition of The district court declined to certify the issues for appeal under 28 U.S.C. § 1292(b) and Fed.R.Civ.P. 54(b). After the final order was entered, Kirby, Langway, and Hansell Post filed protective appeals, and this court granted their motion to consolidate the later appeals with the identical appeals argued in February 1984. We need not address the general question of the appealability of an order disqualifying counsel in a civil case, see Koller v. Richardson-Merrell, Inc., 737 F.2d 1038 (D.C. Cir.) (interlocutory appeal available), cert. granted, U.S.         , 105 S.Ct. 2980, 83 L.Ed.2d 226 (1984). But see Gibbs v. Paluk, 742 F.2d 181 (5th Cir. 1984).

We simply follow the rule in this circuit that a premature appeal can be reviewed if a subsequent judgment of the district court effectively terminates the litigation. Jetco Elec. Indus., Inc. v. Gardiner, 473 F.2d 1228, 1231 (5th Cir. 1973); accord Martin v. Campbell, 692 F.2d 112, 114 (11th Cir. 1982).

We remand to the district court with instructions to vacate as moot those portions of the November 8, 1983 order ordering attorneys’ fees, costs, voidable opt-out exclusions, and cessation of defense communications with members of the plaintiff class. United States v. Munsingwear, 340 U.S. 36, 39, 71 S.Ct. 104, 106, 95 L.Ed. 120036 (1950). *1200

A different result must obtain with respect to the fines and disqualification imposed upon counsel.

The $50,000 fine assessed against Kirby and Hansell Post was imposed pursuant to the inherent powers of the district court and is not subject to revocation by the parties.

The issue of the fine thus remains alive.

We reach the same conclusion with respect to disqualification of counsel.

The unique nature of a class action necessitates participation of counsel even after the settlement is approved by the court. Notice of the settlement must be sent to all class members. Individual claims must be filed, negotiated, and paid.

Counsel for both sides bear the primary responsibility for administering the settlement, usually a lengthy process.

The Bank can still be hampered, then, by its counsel’s inability to appear before the court in this case.14

14. We note further that the brand of disqualification was not lifted at the close of the disciplinary action and consequent disqualification may expose counsel to further sanctions by the bar and portends adverse effects upon counsel’s careers and public image.

The effects of disqualification will linger long after the closing of the case.

The controversy thus remains live and demands consideration. Connell v. Shoemaker, 555 F.2d 483, 486-87 (5th Cir. 1977); United States v. Schrimsher, 493 F.2d 842, 844 (5th Cir. 1974); see also Sibron v. New York, 392 U.S. 40, 50-58, 88 S.Ct. 1889, 1896-1900, 20 L.Ed.2d 917 (1968).


Petitioners argue that they cannot be held to account because their actions were not in derogation of law. The district court held otherwise, 102 F.R.D. 754 grounding its order for sanctions in violations of the May 20 protective order, the June 30 class notice order, Local Rule 221.2, and the Model Rules of Professional Conduct. Because we conclude that the defense campaign violated the protective and class notice orders, we do not reach the question of the constitutional validity of Local Rule 221.2.15

15. See supra note 11 for the text of Local Rule 221.2. Petitioners assert that that provision lacked legal effect because previous decisions of the Northern District of Georgia declared the rule unconstitutional under See Nation v. Winn-Dixie, No. C80-1468A (N.D.Ga. May 12, 1981) (Evans, J.); Kilgo v. Bowman Transp., Inc., 88 F.R.D. 592 (N.D.Ga. 1980).

We affirm the district court with respect to its rulings predicated on Model Rules 4.2 and 8.4(d).

Kirby acknowledges the existence of the May and June rulings but argues that the orders did not involve and therefore did not ban opt-out solicitations. According to Kirby, the sole effect of the directives was to limit the number of depositions the Bank could take, leaving the Bank free to initiate contacts by other means.

In essence Kirby argues that the mandate of the district court cannot exceed the corners of the motion that requested it. Such a conception runs counter to the Court’s preeminent role in managing the notification process, In re Air Crash Disaster at Florida Everglades, 549 F.2d 1006, 1012 n. 8 (5th Cir. 1977), and effectively would stymie the court whenever it sought to respond to an unfolding and often unpredictable sequence of events.

This appeal is a case in point.

The plaintiffs originally moved for a ban on depositions out of concern for harassment.

The district judge’s suggestions recommending the substitution of affidavits and the pitched debate that followed widened the inquiry to the larger issue of intimidation through all forms of unsupervised contacts.

Viewed in context, the import of the resulting order was unmistakable.

The decision to take the question of informal contacts with class members under advisement acted as an order which barred opt-out solicitations and similar communications until further notice.

With a single narrow exception, defense counsel were not to contact prospective class members.

Kirby’s argument necessarily would reduce the devices of briefing and advisement to a nullity. As the district 1201 court succinctly noted, “counsel are not permitted to discount the Court’s unqualified instructions *1201 in light of colloquy which precedes a ruling or in light of the Court’s perceived reason for an order.” Opinion of the district court at 34.

We therefore conclude that the May 20 ruling and the companion June ruling prohibited the Bank’s communications campaign.

The orders, which were directed to counsel as agents of the Bank, were binding on the Bank in its capacity as principal. See Link v. Wabash R.R. Co., 370 U.S. 626, 633-34, 82 S.Ct. 1386, 1390, 8 L.Ed.2d 734 (1962); Durrett v. Jenkins Brickyard, Inc., 678 F.2d 911, 916 (11th Cir. 1982).

Similarly, we do not fault the orders for perceived procedural defects under Fed.R.Civ.P. 65(d).

Rule 65(d) states that injunctions and restraining orders must set forth the reasons for their issuance and identify, with reasonable detail, the acts to be restrained.

The orders at issue, however, are of a different ilk. The lower court correctly characterized the rulings as directives to counsel in their capacity as officers of the court, pursuant to the court’s inherent power to manage its cases. See Fed.R.Civ.P. 23(d)(2). The more relaxed prerequisites of Rule 23(d)(2) therefore applied, as the district court noted:

Findings of fact and technical precision are unnecessary for such direction to be valid; rather the direction must only be (a) within the Court’s power and (b) specific enough so that counsel may understand what conduct or action is required. Opinion of the district court at 34.

The trial court justifiably found that both criteria were “amply met in the instant case.” Id.


Rule 23(b)(3), which affords class relief when common questions of law or fact predominate and the class action mechanism is superior to other means of adjudication, provided the vehicle for the Kleiner litigation.  The events of this case draw into question the lower court’s authority under the federal rules or statutes to  forbid defense contacts with the plaintiff class for the purpose of eliciting exclusion requests.16 See Gulf Oil Co. v. Bernard, 452 U.S. 89, 99, 101 S.Ct. 2193, 2199, 68 L.Ed.2d 693 (1981).

16. Numerous facts lead to the almost inescapable conclusion that the point of the communications campaign was not, as the Bank would have it, to alleviate consumer confusion, but rather to solicit as many exclusions as possible before the court was alerted to the Specifics include: the running tally of commitments and corresponding dollar values; the exhortation to do the “best selling job ever”; the stated objective to get customers to withdraw from the class; and the haste and secrecy of the campaign.

With the introduction of the 23(b)(3) class action in the 1966 amendments to the Federal Rules, courts acquired the authority to consolidate similar claims in order to avoid repeated trials of identical proof even though the cases could fairly be litigated on an individual basis. The resulting economy of effort and uniformity of result was achieved,17 however, only at the cost of binding individual class members through the res judicata effects of litigation over which they lacked control. Kaplan, Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rule of Civil Procedure (I), 81 Harv.L.Rev. 356, 390, 392 (1967).

17. The stare decisis effect of the initial judgments may frustrate later claimants’ efforts to In addition, the expense of litigation frequently deters claimants from asserting individual claims. Litigants further benefit from the increased bargaining power afforded a class action.

The dualistic design of the 23(b)(3) class action underscores the tension between individual autonomy and the search for consistency and truth.

Its promulgation is proof of the preference for class adjudication of cumulative claims, yet the device is unique among Rule 23 class actions in giving eligible members the right of 1202 exclusion from the class.18 Fed.R.Civ.P. 23(c)(2)(A). *1202

Alternatively, individual class members are entitled to intervene as of right.

To effectuate these safeguards, the court must “direct to the members of the class the best notice practicable under the circumstances,” informing them of the opportunity to exclude themselves or to participate in the judgment, whether favorable or not. Rule 23(c)(2).

18. The exclusion mechanism was consciously designed to tilt the balance of inertia in favor of class In the words of one of the drafters of the provision:

[R]equiring the individuals affirmatively to request inclusion in the lawsuit would result in freezing out the claims of people — especially small claims held by small people — who for one reason or another, ignorance, timidity, unfamiliarity with business or legal matters, will simply not take the affirmative step. The moral justification for treating such people as null quantities is questionable.

Kaplan, Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rules of Civil Procedure (I), 81 Harv.L.Rev. 356, 397-98 (1967).

When confronted with claims pressed by a plaintiff class, it is obviously in defendants’ interest to diminish the size of the class and thus the range of potential liability by soliciting exclusion requests.19 See Comment,

Restrictions on Communication By Class Action Parties and Attorneys, 1980 Duke L.J. 360, 363. Such conduct reduces the effectiveness of the 23(b)(3) class action for no reason except to undermine the purposes of the rule. See In re General Motors Corporation Engine Interchange Litigation, 594 F.2d 1106, 1140 n. 60 (7th Cir. 1979).

19. Similarly, it is hardly surprising that the defense bar continues to advocate the substitution of an opt-in One commentator has observed:

[T]he opt-in procedure is . . . a very effective means of diminishing the size of a class, because an affirmative act by an individual is always less likely than mere inaction and hence presents certain dangers. Requiring class members to insert themselves into the suit will result inevitably in smaller classes, unrelated to the magnitude of the harm done or the merits of the case. In addition to its unfairness, unnecessary reduction of class size negates the perceived benefits of class actions as efficient and economic means of litigation, since those who fail to opt in could bring their own suits, thereby multiplying cases where one would do.

Note, Reforming Federal Class Action Procedure: An Analysis of the Justice Department Proposal, 16 Harv.J.Legis. 543, 571-72 (1979) (footnotes omitted).

A unilateral communications scheme, moreover, is rife with potential for coercion. “[I]f the class and the class opponent are involved in an ongoing business relationship, communications from the class opponent to the class may be coercive.” Note, Developments in the Law Class Actions, 89 Harv.L.Rev. 1318, 1600 (1976). See also H. Newberg, Newberg on Class Actions, current supp. § 2690f (Feb. 1984); Comment, 1980 Duke L.J. at 363. This litigation is illustrative. The class consisted of Bank borrowers, many of whom were dependent on the Bank for future financing. Bank customers affected by the litigation included “those who anticipated seeking a note `rollover,’ new loans, extension of lines of credit, or any type of discretionary financial indulgence from their loan officers, and who did not have convenient access to other credit sources.” Opinion of the district court at 25-26. As the district court pointed out, the high number of exclusion requests was witness to the inherent coercion of the Bank’s machinations.

In view of the tension between the preference for class adjudication and the individual autonomy afforded by exclusion, it is critical that the class receive accurate and impartial information regarding the status, purposes and effects of the class action.20 This is especially important since the court must not consider the probable 1203 outcome of the case in passing on class certification. Eisen v. Carlisle Jacquelin, *1203 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). The “best practicable notice” envisioned by the Rule is notice that conveys objective, neutral information about the nature of the claim and the consequence of proceeding as a class. In re Nissan Motor Corporation Antitrust Litigation, 552 F.2d 1088, 1104-05 (5th Cir. 1977).

20. In response to the Bank’s fear that recipients would discard the notice as “junk mail,” the district court remarked:

The Court recognizes that the telephone campaign may have served one legitimate interest which is shared by the Court: minimizing participation by default. However, other methods are available which do not infringe on the free choice of prospective class members. One is using a bold-type notice on the envelope in which the class notice is mailed, identifying it as a legal notice, such as was done here. Another possibility would be telephonic contacts by a disinterested third party, acceptable to both plaintiff and defendant, who would determine whether the notice had been received.

Opinion of the district court at 25 (footnote omitted).

Unsupervised, unilateral communications with the plaintiff class sabotage the goal of informed consent by urging exclusion on the basis of a one-sided presentation of the facts, without opportunity for rebuttal. The damage from misstatements could well be irreparable. See Zarate v. Younglove, 86 F.R.D. 80, 90 n. 13  (C.D.Cal. 1980).

Concomitantly, a solicitations scheme relegates the essential supervision of the court to the status of an “afterthought.”See Opinion of the district court at 36.

In this case, the carefully constructed edifice of check and countercheck, notice and reply, was obliterated when the telephones were lifted from their cradles.

The Bank’s actions obstructed the district court in the discharge of its duty to “protect both the absent class and the integrity of the judicial process by monitoring the actions before it.” Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 331, 100 S.Ct. 1166, 1170, 63 L.Ed.2d 427 (1980); see In re Air Crash Disaster, 549 F.2d at 1012 n. 8; 2 H. Newberg, supra, at 1189. The Bank’s subterfuge and subversion constituted an intolerable affront to the authority of the district court to police class member contacts.

Accordingly, we hold that the trial court had ample discretion under Rules 23(b)(3) and 23(d)21 to prohibit the Bank’s overtures.

21. Rule 23(d)(2) authorizes the court of record to enter orders “requiring, for the protection of the members of the class . .., that notice be given in such manner as the court may direct to some or all of the members of any step in the action…”


The essence of petitioners’ claim is a first amendment challenge to the disciplinary action of the trial court.

They attack the May 20 and June 30 orders as an unconstitutional prior restraint, arguing that the rulings were neither specific nor “narrowly tailored to address an immediate, compelling danger” in conformance with Bernard v. Gulf Oil Co., 619 F.2d 459 (5th Cir. 1980) (en banc), aff’d, 452 U.S. 89, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981).

“[I]t has never been deemed an abridgement of freedom of speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language, either  spoken, written, or printed.” Giboney v. Empire Storage Ice Co., 336 U.S. 490, 502, 69 S.Ct. 684, 690, 93 L.Ed. 1204834 (1949). Petitioners’ speech was expression of a commercial variety,22 which until *1204  recently fell outside the ambit of the first amendment. In Virginia State Board of Pharmacy v. Virginia Citizens Council, 425 U.S. 748, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976), the Supreme Court announced that commercial speech would henceforth receive limited first amendment protection consonant with its role in assuring the proper allocation of resources and the formation of informed decisions. Id. at 762, 765, 96 S.Ct. at 1827. Subsequent Supreme Court cases have delimited the contours of the right accorded commercial speech.

22. The Bank’s entreaties indubitably amounted to speech of a commercial Commercial speech consists of expression related largely or solely to the economic interests of the speaker and the audience. Central Hudson Gas Elec. Corp. v. Public Service Comm’n, 447 U.S. 557, 561, 100 S.Ct. 2343, 2348, 65 L.Ed.2d 341 (1980); Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748, 762, 96 S.Ct. 1817, 1825, 48 L.Ed.2d 346 (1976). Commercial speech encompasses not merely direct invitations to trade, but also communications designed to advance business interests, exclusive of beliefs and ideas. See In re Primus, 436 U.S. 412, 438 n. 32, 98 S.Ct. 1893, 1908 n. 32, 56 L.Ed.2d 417 (1978). See also, e.g., Bolger v. Youngs Drug Products Corp., 463 U.S. 60, , 103 S.Ct. 2875, 2880- 81, 77 L.Ed.2d 469 (1983) (manufacturer’s informational pamphlets discussing the advisability of prophylactics constitute commercial speech); Friedman v. Rogers, 440 U.S. 1, 11-12, 99 S.Ct. 887, 895, 59 L.Ed.2d 100 (1979) (trade name constitutes commercial speech).

Clearly, the thrust of the Bank’s campaign was to defend its business dealings; its motivation, to shore up Bank earnings. As the court below observed:

[The purpose of the program] was to further what the Bank perceived as its own financial interests. The interests of its customers had nothing to do with it.

Opinion of the district court at 24. The Bank does not assert, as it cannot, that the campaign implicated rights of political expression, free association, or mutual assistance in asserting legal rights. See Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 458-59, 98 S.Ct. 1912, 1919-20, 56 L.Ed.2d 444 (1978). Nor was the underlying message protected as pure speech. Bolger, 463 U.S. at                                       n. 14, 103 S.Ct. at 2880 n. 14. Taken together, the defense of the Bank’s business conduct, the underlying profit motive, and the invitation to opt out branded the telephone canvass as speech of a commercial nature. Id., 463 U.S. at                                           , 103 S.Ct. at 2880-81.

As a threshold matter, untruthful or misleading speech has no claim on first amendment immunity. Central Hudson Gas Co. v. Public Service Commission, 447 U.S. 557, 566, 100 S.Ct. 2343, 2351, 65 L.Ed.2d 341 (1980); Virginia Pharmacy Board, 425 U.S. at 771, 96 S.Ct. at 1830.

Commercial speech merits constitutional safeguards only to the extent it is accurate, in keeping with its purpose of insuring the free flow of reliable information crucial to independent decisionmaking.

No constitutional objection thus inheres in banning “forms of [commercial] communications more likely to deceive the public than to inform it……………………….. ” Central Hudson, 447 U.S. at 563, 100 S.Ct. at 2350 (citations omitted). Commercial speech that is protected is legitimately subject to stricter governmental regulations than that allowed for noncommercial expression.

See Virginia Pharmacy Board, 425 U.S. at 771-72 n. 24, 96 S.Ct. at 1830-31 n. 24; United States Postal Service v. Athena Products, Ltd., 654 F.2d 362, 367 (5th Cir. United B 1981), cert. denied, 456 U.S. 915, 102 S.Ct. 1768, 72 L.Ed.2d 173  (1982), consistent with the “subordinate position in the scale of First Amendment values” assigned to commercial speech. Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447, 456, 98 S.Ct. 1912, 1918, 56 L.Ed.2d 444 (1978).

In the brief life of the commercial speech doctrine, the Supreme Court has repeatedly warned that traditional prior restraint safeguards do not necessarily extend to questions of commercial speech.

See Central Hudson, 447 U.S. at 564 n. 6, 571 n. 13, 100 S.Ct. at 2350 n. 6, 2354 n. 13; Friedman v. Rogers, 440 U.S. 1, 10 n. 9, 99 S.Ct. 887, 894 n. 9, 59 L.Ed.2d 100 (1979); Virginia Pharmacy Board, 425 U.S. at 771-72 n. 24, 96 S.Ct. at 1830-31 n. 24. Commercial speech is marked by a resilience not found in political commentary or discourse in ideas. Virginia Pharmacy Board, 425 U.S. at 771 n. 24, 96 S.Ct. at 1830 n. 24.

Unlike news reportage commercial speech is amenable to advance verification because the speaker ordinarily “seeks to disseminate information about a specific product or service that he himself provides and presumably knows more about than anyone else.” Id. For these reasons, commercial speech seldom implicates the traditional concerns underlying the prior restraint doctrine.

In an uncompromising stance, petitioners ignore the generic distinctions between pure and commercial speech and argue that the prior restraint strictures announced in the en banc decision in Bernard 23 must apply with equal force to their case.

An assessment of their claim requires a reexamination of Bernard in light of the doctrine governing commercial speech.

23  619 F.2d 459 (5th Cir. 1980) (en banc).

Bernard was spawned from a set of successive race discrimination claims lodged by black employees of the Port Arthur, Texas Gulf Oil plant. An initial EEOC proceeding had culminated in a conciliation agreement providing for back pay. Dissatisfied with the resolution reached by the EEOC, plaintiffs, represented by local counsel in affiliation with the NAACP Legal Defense and Education Fund, filed a class action against Gulf 1205 alleging race discrimination. *1205

Before the date of class certification, Gulf requested an order limiting communications by plaintiffs and their counsel with actual or potential class members. The company attested that counsel for plaintiffs had advised potential class members that they stood to double their recovery by refusing to sign releases in favor of Gulf under the conciliation agreement. Without first corroborating Gulf’s unsworn allegations or specifying findings of fact, the trial court entered an order barring parties and counsel from contacting the plaintiff class without advance approval. The disputed order was patterned after a model order contained in the Manual for Complex Litigation, pt. II, § 1.41 (1973 ed.). 619 F.2d at 463-64.

On review, a panel of the former fifth circuit affirmed the district court. 596 F.2d 1249 (5th Cir. 1979). The court en banc vacated the panel opinion, 604 F.2d 449 (5th Cir. 1979), and reversed the district court on first amendment grounds. Holding that the attempted solicitations constituted protected, non-commercial political expression24 which called “into play the full panoply of First Amendment safeguards against prior restraint,”

619 F.2d at 473, the en banc court refused effect to the order as an unconstitutional prior restraint. The disputed order was constitutionally deficient because the suppressed expression posed no certain threat of direct, immediate and irreparable harm; because the order was not narrowly drawn and limited to the least restrictive means of regulation; and because it lacked predicate findings of particular abuses. Id. at 473-77.

24. The Bernard case qualified as protected political expression under NAACP Button, 371 U.S. 415, 83 S.Ct. 328, 9 L.Ed.2d 405 (1963), and In re Primus, 436 U.S. 412, 98 S.Ct. 1893, 56 L.Ed.2d 417 (1978), because counsel for plaintiffs had no direct financial stake in the case and because the case was a vehicle for expressing the political beliefs of the NAACP. 619 F.2d at 472-73.

On review, the Supreme Court affirmed the en banc court. Gulf Oil Co. v. Bernard, 452 U.S. 89, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981). Resolving the case on statutory grounds to avoid the first amendment question, the court concluded that the contested order thwarted the named plaintiff’s ability to form a class and prosecute the class action, in violation of Rule 23. Id. at 101-04. The Court held that under Rule 23, orders barring plaintiff contacts with members of the plaintiff class “should be based on a clear record and specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties.” Id. at 101.

Bernard was a classic case of noncommercial speech which directly implicated the doctrine of prior restraint. In the domain of commercial speech, as discussed, the Supreme Court had issued repeated admonitions against the wholesale incorporation of the law of prior restraint.25 Athena Products, 654 F.2d at 367. We therefore

judge petitioners’ prior restraint argument under a relaxed standard of scrutiny better suited to the hardiness of commercial speech. Cf. In re San Juan Star Co., 662 F.2d 108, 116 (1st Cir. 1981) (relaxed standard for review of order prohibiting dissemination to press of communications produced during discovery).

25. In Bernard the Supreme Court similarly took pains to not to rule out all restraints under Rule 23:

In the conduct of a case, a court often finds it necessary to restrict the free expression of participants, including counsel, witnesses, and jurors. Our decision regarding the need for careful analysis of the particular circumstances is limited to the situation before us — involving a broad restraint on communication with class members. We also note that the rules of ethics properly impose restraints on some forms of expression. See, e.g., ABA Code of Professional Responsibility, DR 7-104 (1980).

Bernard, 452 U.S. at 104 n. 21, 101 S.Ct. at 2201-2202 n. 21.

In general, an order limiting communications regarding ongoing litigation between a class and class opponents will satisfy first amendment concerns if it is grounded in good cause and issued with a “heightened sensitivity” 1206 for first amendment concerns, cf. id. at 116. In ascertaining *1206 the existence of good cause, four criteria are determinative: the severity and the likelihood of the perceived harm; the precision with which the order is drawn; the availability of a less onerous alternative; and the duration of the order. Id.; Athena Products, 654 F.2d at 367-68.

Consistent with the Supreme Court’s clear concern with ensuring the effective regulation of advertising and other forms of solicitation, Athena Products, 654 F.2d at 367, it is unnecessary for a trial court to issue particularized findings of abusive conduct when a given form of speech is inherently conducive to overreaching and duress.

The Supreme Court has acknowledged that unsupervised oral solicitations, by their very nature, are wont to produce distorted statements on the one hand and the coercion of susceptible individuals on the other:

[I]n-person solicitation may exert pressure and often demands an immediate response, without providing an opportunity for comparison or reflection.

The aim and effect of in-person solicitation may be to provide a one-sided presentation and to encourage speedy and perhaps uninformed decisionmaking; there is no opportunity for intervention or counter-education. . . . Ohralik, 436 U.S. at 457, 98 S.Ct. 1919 (footnote omitted). See also id. at 458, 460-62, 98 S.Ct. at 1919, 1920-21. Under such circumstances, “the absence of explicit proof or findings of harm or injury is immaterial,” id. at 468, 98 S.Ct. at 1924, and the trial court is empowered to enter prophylactic orders designed to prevent harm before it happens.26Id. at 464-68, 98 S.Ct. at 1922-24. The Bank’s telephone solicitation canvass is a classic example of a major potential abuse which necessitates restraint.27See Bernard, 619 F.2d at 476.

26. While the Ohralik analysis involved a subsequent as opposed to a prior restraint, the decision’s approval of prophylactic rules comports with the policy encouraging the effective oversight of commercial

27. This case illustrates precisely the same dangers discussed in The telephone campaign left the court and counsel powerless to corroborate the supposedly innocent content of the conversations. The Bank’s claims of innocence are suspect, moreover, because the briefing materials used to answer customer questions insinuated reprisals or distortions of fact, as the court justifiably found. “[B]oth the Bank’s top management and its counsel knew that by verbally providing information to customers through Defendant’s employees there was a high likelihood that the facts would become even further skewed in transmission. This likelihood was further heightened by the Bank’s election to use a non-lawyer, who had little familiarity with the case, but good persuasive skills, to make the primary presentation to those who would be contacting absent class members.” Opinion of the district court at 27. Worse yet, the loan officers who made the telephone calls were the ones who controlled the customer’s line of credit, and their on-the-spot entreaties pressured the listener to reach an immediate decision to comply before hearing the opposite point of view. The “usual cure for false speech is more speech,” but in this case the Bank left “no time for more speech before the party opted out.” Zarate v. Younglove, 86 F.R.D. 80, 90 n. 13 (C.D.Cal. 1980). It comes as no surprise that over seventy-five percent of those contacted decided to opt out.

In the realm of litigation, a fair and just result often presupposes restraints on the speech of the parties. Seattle Times Co. v. Rhinehart,                U.S.      , 104 S.Ct. 2199, 2207 n. 18, 81 L.Ed.2d 17 (1984). Inroads on the principle forbidding the solicitation of exclusion requests in 23(b)(3) class actions could spell the ultimate extinction of that form of relief. Given the inherent coercion conveyed by the Bank’s covert campaign, we agree that the district court possessed the authority to regulate such contacts without the predicate record and findings required in Bernard.

The trial court’s order was narrowly drawn to avoid suppressing utterances worthy of first amendment protection. As a directive addressed to counsel for the Bank, the ambit of the order was restricted to communications regarding the litigation. The order thus did not impinge on the Bank’s ability to speak with 1207 customers about routine business matters unrelated to the lawsuit. Since defense counsel had *1207 an ethical duty28 to refrain from discussing the litigation with members of the class as of the date of class certification, if not sooner, the order in no way tread on legitimate communications by counsel.

28. The duty arises from Rule 2 of the ABA Model Rules of Professional Conduct (1983) (former version at Disciplinary Rule 7-104), which provides:

In representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so.

At a minimum, class counsel represents all class members as soon as a class is certified, Van Gemert v. Boeing Co., 590 F.2d 433, 440 n. 15 (2d Cir. 1978), aff’d, 444 U.S. 472, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980); if not sooner, see Roper v. Consurve, , 578 F.2d 1106, 1110 (5th Cir. 1978), aff’d sub nom. Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980).

The court below correctly concluded that the solicitation of exclusions constitutes a “per se” abuse. Under such circumstances, the court was justified in denying the Bank discovery of class members for purposes of rebutting the charges of coercion.

Similarly, we discern no less restrictive alternative to the district judge’s order. The purpose of the directive was to filter news of the opportunity for exclusion through the impartial and open medium of court-supervised notice. As such, the order implemented the preview screening which the Supreme Court has commended as a constitutional substitute for a complete ban on communications.29 Central Hudson, 447 U.S. at 571 n. 13, 100 S.Ct. at 2354 n. 13.

29. Alternatively, the order was a lawful restriction on the time, place and manner of Bates v. State Bar of Arizona, 433 U.S. 350, 384, 97 S.Ct. 2691, 2709, 53 L.Ed.2d 810 (1977).

With respect to commercial and noncommercial speech alike, “the first amendment protects against erroneously imposed prior restraints of excessive duration.” Athena Products, 654 F.2d at 367. The lower court’s order, by its very nature, limited defense contacts only up through the time of trial. See In re San Juan Star, 662 F.2d at 117. The ban on exclusion solicitations, from a practical standpoint, was of even briefer duration, extending only through the end of the exclusion period. The limited duration of the order thus satisfied the requirements of the first amendment.

“When dealing with restrictions on commercial speech we frame our decisions narrowly, `allowing modes of regulation [of commercial speech] that might be impermissible in the realm of noncommercial expression.'” Friedman, 440 U.S. at 11 n. 9, 99 S.Ct. at 894 n. 9 (quoting Ohralik, 436 U.S. at 456, 98 S.Ct. at 1918).

The scope and the breadth of the principle against prior restraint in the realm of commercial speech has yet to be charted. In deciding that the order of the court withstands scrutiny under the first amendment, we do not necessarily intimate that the law of prior restraint finds no sanctuary in matters of commercial speech.

We do, however, conclude that the narrow scope of the order at hand, the unprotected nature of petitioners’ speech, and the gravity of the harm it threatened dictate affirmance in this case.


The district court twice over issued orders directing counsel for the Bank to refrain from contacting the plaintiff class. Kirby knew of the orders, as the trial court found.30 Nevertheless he counselled the Bank to disregard them. The question on review is whether Kirby and his firm, as counsel for the Bank, properly face discipline as a consequence of their advice.

30. We review the district court’s findings of fact in a counsel disqualification case under the clearly erroneous Woods v. Covington County Bank, 537 2d 804, 810 (5th Cir. 1976).

According to appellants, sanctions must not issue because their advice, however mistaken, was given in good faith. Observing that a lawyer may counsel or assist a client’s good faith efforts to test the validity of a law in 1208 good conscience, they maintain *1208 that a lawyer who counsels disobedience to a standing order of the court stands firmly within ethical bounds.

The inevitable result of this position would be to cripple orderly processes of trial and appeal on which enforcement of the laws depends. As a fundamental proposition, orders of the court ” must be obeyed until reversed by orderly review or disrobed of authority by delay or frustration in the appellate process……………………………………… ” United States v. Dickinson, 465 F.2d 496, 509 (5th Cir. 1972) (emphasis in original), cert. denied, 414 U.S. 979, 94 S.Ct. 270, 38 L.Ed.2d 223 (1973); see GTE Sylvania, Inc. v. Consumers Union, 445 U.S. 375, 386-87, 100 S.Ct. 1194, 1201-02, 63 L.Ed.2d 467 (1980); Maness v. Myers, 419 U.S. 449, 458, 95 S.Ct. 584, 590, 42 L.Ed.2d 574 (1975). Parties and counsel alike are bound by this admonition. Maness, 419 U.S. at 459, 95 S.Ct. at 591. If the order appears to be incorrect, the proper course of action lies in review:

If the order is believed to be incorrect, the remedy generally is to seek a change in the order — usually by a motion to quash — and, if this is denied, then to appeal and, absent a stay, promptly to comply with the order.

In re Grand Jury Proceedings, 601 F.2d 162, 168-69 (5th Cir. 1979) (citation omitted).

Disobedience of a court order unequivocally merits punishment save in instances in which compliance would necessarily result in “`an irrevocable and permanent surrender of a constitutional right.'” Id. at 169 (quoting Dickinson, 465 F.2d at 512); Maness, 419 U.S. at 460, 95 S.Ct. at 592. In Walker v. City of Birmingham, 388 U.S. 307, 87 S.Ct. 1824, 18 L.Ed.2d 1210 (1967), the Supreme Court “emphatically rejected the suggestion that an individual may disregard a court order simply because [it] interfered with . . . his exercise of First Amendment rights.” Dickinson, 465 F.2d at 509. Obviously, commercial speech commands no greater claim to immunity.

It is essential that lawyers have the liberty to advise their clients of the legal consequences of proposed courses of action free of a Damoclean sword. Maness, 419 U.S. 467, 95 S.Ct. at 595; In re Watts, 190 U.S. 1, 29, 23 S.Ct. 718, 725, 47 L.Ed.2d 933 (1903). Otherwise, lawyers would shelve their “zeal for forthrightness and independence,” Maness, 419 U.S. at 466, 95 S.Ct. at 595, which secures informed compliance with the law.

This case, however, is of an entirely different order. When a court issues a ruling, a lawyer must advise his client to comply and must not counsel disobedience. Id. at 459, 95 S.Ct. at 591. The opposite result, if sanctioned, could only result in the unravelling of the rule of law. There are few mandates so plain as the command to obey the order of the court.31 Nevertheless, petitioners gave comfort and counsel to disobedience, in lieu of review. Under such circumstances, we conclude that the imposition of sanctions was an appropriate act by the district court in defense of its authority.

31. ABA Model Rule 4(c), furthermore, provides that a lawyer shall not “knowingly disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists………………… ” (emphasis added).

Because the issue of advice turned on compliance with court orders rather than with first amendment immunity, the district court properly rejected an offer of testimony by C.B. Rogers as irrelevant.

To compound matters, Kirby advised the Bank to use the telephone in lieu of letters because it would be more effective.

“There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.”

Model Rules of Professional Conduct Rule 1.2(d) comment (1983).

Kirby’s review of written documents and collation of class lists only deepened his entanglement in illegality.

“By actively assisting the Bank in preparing the information 1209 to be given to prospective class members, some of which was *1209 legal in nature, and organizing the contact system, Kirby did effectively communicate with persons represented by counsel,” Opinion of the district court at 30 — in direct disregard of court orders to the contrary.

This court, if necessary, will lend the bar unwavering support in the zealous commission of its duties, but “it will not equate contempt with courage . . . .” Sacher v. United States, 343 U.S. 1, 13-14, 72 S.Ct. 451, 457, 96 L.Ed. 717 (1952).


The vacated citations for contempt and the imposition of a substantial fine payable to the clerk of the district court raise the question of the procedural adequacy of the October 5 proceedings. Petitioners attempt to give the disciplinary proceedings a criminal cast in order to invalidate them for lack of criminal procedural safeguards. The punitive character of the $50,000 fine, in their view, fixes the proceeding as one of criminal contempt, requiring the right to jury trial and analogous criminal procedural rights.

This position was voiced long ago in Gamble v. Pope Talbot, Inc., 307 F.2d 729 (3d Cir.) (en banc), cert.  denied, 371 U.S. 888, 83 S.Ct. 187, 9 L.Ed.2d 123 (1962), and it is one that has met consistent rejection in this circuit. Courts possess the inherent power to protect the orderly administration of justice and to preserve the dignity of the tribunal. Roadway Express, Inc. v. Piper, 447 U.S. 752, 764-65, 100 S.Ct. 2455, 2463, 65 L.Ed.2d 488 (1980). “The inherent power of a court to manage its affairs necessarily includes the authority to impose reasonable and appropriate sanctions upon errant lawyers practicing before it.” Flaksa v. Little River Construction Co., 389 F.2d 885, 888 (5th Cir. 1968); see Miranda v. Southern Pacific Transportation Co., 710 F.2d 516 (9th Cir. 1983); Note, Civil Procedure Power of Federal Courts to Discipline Attorneys for Delay in Pre-trial Procedure, 38 Notre Dame L. 158, 161-66 (1963). A trial judge possesses the inherent power to discipline counsel for misconduct, short of behavior giving rise to disbarment or criminal censure, without resort to the powers of civil or criminal contempt.32 Flaksa, 389 F.2d at 888 n. 10. The court’s power to impose appropriate sanctions on attorneys practicing before it “springs from a different source than does the power to punish for criminal contempt.” Pope Talbot, Inc., 307 F.2d at 735-36 (Biggs, C.J., dissenting); See also Ex parte Robinson, 86 U.S. (19 Wall.) 505, 512, 22 L.Ed. 205 (1873) (discussing the source and scope of a court’s power to cite for contempt or disbar attorneys).

32. Contrary to petitioners’ assertion, Local Rule 54 of the northern district of Georgia does not specify the power of contempt as the sole remedy for attorney violations of the rules of ethics.

The authority of a court over officers of its bar is at least as great as its power over litigants.  Roadway Express, 447 U.S. at 766, 100 S.Ct. at 2464 (citing Flaksa).

Since misconduct by a party courts the risk of outright dismissal, lesser sanctions undoubtedly attend the court’s inherent power to discipline intentional attorney misconduct of the sort involved in this case. See id.

Such sanctions include assessment of attorneys’ fees and costs, id.; disqualification of counsel, Flaksa, 389 F.2d at 887; and monetary penalties payable to the clerk of the court, Burden v. Yates, 644 F.2d 503, 505 (5th Cir. Unit B 1981); Woodham v. American Cystoscope Co., 335 F.2d 551, 557 n. 15 (5th Cir. 1964).

The case thus devolves into a question of the severity of the sanctions as opposed to their propriety.

“[T]he  most severe in the spectrum of sanctions [dismissal] . . . must be available to the district court in appropriate cases, not merely to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those 1210 who might be tempted to such conduct in the absence of such a deterrent.”

*1210 National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 643, 96 S.Ct. 2778, 2781, 49 L.Ed.2d 747 (1976) (per curiam).

Since dismissal is available for purposes of deterrence, stiff monetary penalties would certainly be appropriate, at least as long as they did not equal or exceed the damages which would be awarded in dismissal.

See Comment, The Emerging Deterrence Orientation in the Imposition of Discovery Sanctions, 91 Harv.L.Rev. 1033, 1048 n. 90 (1978); Renfrew, Discovery Sanctions: A Judicial Perspective, 67 Calif.L.Rev. 264, 278 (1979).

In view of counsel’s arrogance and the millions of dollars that hung in the balance, the size of the fine assessed by the court was entirely commensurate with the willfulness and gravity of counsel’s misconduct.

“Unless severe sanctions are imposed . . . the deterrent function of sanctions will not be achieved.”

Renfrew, supra, at 643.

Petitioners also object to lead trial counsel Kirby’s disqualification from continued representation in the case.33 In Woods v. Covington County Bank, 537 F.2d 804 (5th Cir. 1976), this circuit formulated a two-part test for disqualification of counsel:

33. On review, the clearly erroneous test applies to findings of fact while the application of ethical standards requires independent United States v. Hobson, 672 F.2d 825, 827-28 (11th Cir.) cert. denied, 459 U.S. 906, 103 S.Ct. 208, 74 L.Ed.2d 166 (1982); Cossette v. Country Style Donuts, Inc., 647 F.2d 526, 530 (5th Cir. 1981).

First, although there need not be proof of actual wrongdoing, “there must be at least a reasonable possibility that some specifically identifiable impropriety did occur.” Second, “a court must also find that the likelihood of public suspicion or obloquy outweighs the social interest which will be served by a lawyer’s continued participation in a particular case.”

United States v. Hobson, 672 F.2d 825, 828 (11th Cir. 1982) (quoting Woods, 537 F.2d at 813 n. 12), cert. denied, 459 U.S. 906, 103 S.Ct. 208, 74 L.Ed.2d 166 (1982).

Once the preceding requirements are satisfied, a court can order disqualification based solely on past improprieties without regard for future taint affecting the outcome of the proceeding.34

Compare Board of Education v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979).

34. In disputing this test, the petitioners fail to distinguish between disbarment and the less serious sanction of disqualification from a particular The standards are more relaxed for the latter.

The uncontroverted proof of Kirby’s wrongdoing satisfies the first requirement under Hobson.

Turning to the second test, we must weigh the degree to which Kirby’s retention would have eroded public trust in the judiciary against the Bank’s interest in retaining counsel of choice.

The Bank undoubtedly had good reason for wanting to retain, on the eve of trial, the attorney who had prepared its case.

The effects of Kirby’s removal were mitigated, however, by the trial court’s decision to preserve continuity of representation by allowing Hansell Post to defend the Bank in Kirby’s stead.

Juxtaposed against the Bank’s concern is a strong competing interest in securing the obedience to mandates of the court which is necessary to secure the orderly administration of the laws.

See United States v. Dinitz, 538 F.2d 1214, 1219 n. 6 (5th Cir. 1976) (en banc), cert. denied, 429 U.S. 1104, 97 S.Ct. 1133, 51 L.Ed.2d 556 (1977).

Finally, and importantly, the Bank was not an innocent victim of disqualification.

The covert communications scheme was of its own devise and execution.

We therefore hold that the concern for public trust in the impartial enforcement of the laws overrode the Bank’s entitlement to counsel of choice.


Langway met with disqualification for lying on the stand while testifying at the October disciplinary 1211 proceeding.

At the hearing, Jerome Froelich, counsel for plaintiffs, asked Langway to admit stating that *1211 he had not consulted the court about the solicitation campaign because “the court would have stopped us and we wouldn’t have been able to make new law.”

Langway replied, “No, I never said that, Jerry, absolutely did not say that.”

The judge discredited Langway’s testimony and ordered that he be struck as counsel of record in the case based on his denial.

The issue on review is a narrow one.

The trial court disqualified Langway without notice of the charge against him or an opportunity to explain. Langway was not included in the court’s show cause orders.

The first indication that the trial court faulted Langway’s truthfulness or contemplated sanctions against him appeared in the November 8 ruling which summarily ordered his disqualification.

Since the decision to disqualify was neither immediate nor necessary “to preserve order in the court,” Norton v. Tallahassee Memorial Hospital, 700 F.2d 617, 619 (11th Cir. 1983), due process required an opportunity to be heard. Ex parte Robinson, 86 U.S. (19 Wall.) 505, 512-13, 22 L.Ed. 205 (1873). See also In re Ruffalo, 390 U.S. 544, 550-52, 88 S.Ct. 1222, 1225-26, 20 L.Ed.2d 117, modified, 392 U.S. 919, 88 S.Ct. 2257, 20 L.Ed.2d 1380 (1968).

We intimate no disapproval of the district court’s views on Langway’s credibility or on the propriety of the sanction.

We only hold that any sanctions must be imposed in accordance with the due process of law.

We reverse the district court with respect to the general counsel’s case and remand for further proceedings not inconsistent with this opinion.


[81] JAMES C. HILL, Circuit Judge, concurring in part and dissenting in part:

I concur in both the result and rationale of Part II of the majority’s opinion, vacating moot claims, and Part VIII of the majority’s opinion, reversing the ruling on disqualification of attorney Richard M. Langway. I dissent from the majority’s affirmance of sanctions against attorney Richard M. Kirby and the law firm of Hansell Post. I do so not because I approve counsel’s actions in this case — emphatically, I do not — but because the sanctions here at issue were imposed for the violation of direction by the district court which I believe was unclear. Because I am unwilling in principle to place upon an attorney by hindsight a duty to divine at his peril the import of an unclear directive from the court, I reach a result contrary to the majority on the issue of sanctions.

The cornerstone of Judge Vance’s thoughtful resolution of the sanction issue is that “[t]he decision to take the question of informal contacts with class members under advisement acted as an order which barred opt-out solicitations and similar communications until further notice.” Majority opinion at 12. I cannot agree with this determination. When a court tells a lawyer that his argument is under advisement that lawyer should, in fairness to the judge, refrain from further action on the contested point or, alternatively, seek clarification from the  court. This lawyer acted otherwise and in doing so skated on the thinnest of ice. The issue before us is simply whether the ice broke. The majority concludes it did, and I, that it did not.

The power of judicial sanction is great. The consequence of its exercise may be severe. This is properly so because of the magnitude of the interest served, the orderly administration of justice — the rule of law itself. But a concomitant of that power is a great caution and an abiding concern that the rule upon which the law is to operate be clearly articulated. As the majority notes, this is particularly so with respect to lawyers because upon a lawyer’s understanding depend the rights of many, and the trial lawyer is an advocate.

The rule articulated by Judge Evans in this case, and putatively violated by Kirby was, regrettably and through 1212 no fault of *1212 Judge Evans,1 unclear. Solely on that basis, I disapprove the affirmance of sanctions in this case.

1 At whose door may the confusion attending Judge Evans’ direction with respect to the contact of potential class members be laid? I believe it was the responsibility of the lawyer seeking the court’s protection from that contact to request of the court a clear directive. That was not done. And yet, as I cannot fault this earnest and even-handed judge, seeking to pass upon innumerable issues in a complex and quickly moving case, I cannot fault an advocate for overlooking the fact that a directive of the court was phrased with less than absolute clarity. Ours is a human system, striving to be fair. We can expect no more than that.

Ratio decidendi aside, a further observation is warranted. In Bernard v. Gulf Oil Co., 619 F.2d 459 (5th Cir. 1980) (en banc), our predecessor court reversed the district court order prohibiting a class-action litigant’s contact with class members. Two grounds for that result were articulated. The narrower ground, not at issue here, was that the order was inappropriate under Rule 23(d) of the Federal Rules of Civil Procedure. Bernard, 619 F.2d at 478. However, the en banc court also found the subject order implicated first amendment freedoms of expression and invalidated it as an unconstitutional prior restraint. Bernard, 619 F.2d at 477. Reviewing that decision, the Supreme Court affirmed on the Rule 23(d) ground, but was silent on the constitutional holding of the case. Gulf Oil Co. v. Bernard, 452 U.S. 89, 103-104, 101 S.Ct. 2193, 2201, 68 L.Ed.2d 693 (1981). The constitutional holding of Bernard, whatever that holding may be, is thus binding authority in this circuit today. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).

As I read Bernard, it holds that an order barring communication between class-action litigants and other members of the class violates the first amendment. I apprehend that attorney Richard Kirby, perhaps with some surprise, also read Bernard in this way. As I said in Bernard, I believe it unwise to subject orders issued by a trial judge in connection with an ongoing law suit to first amendment scrutiny. Bernard, 619 F.2d at 481 (Hill, J., dissenting). For that reason, I believe Judge Vance’s narrower interpretation of Bernard, incorporated in the majority’s opinion here, states better law. Nevertheless, I am reluctant to uphold sanctions against a lawyer, reading Bernard without benefit of Judge Vance’s opinion, for interpreting that case as I interpreted it.

Finally, it is contended that the attorney did not violate any order of the district court because he did not personally contact members of the subject class but merely assisted his client, the bank, in doing so. This is frivolous! A lawyer is retained by the client as the client’s representative in the judicial process. The client may be bound not only by representations made by the lawyer to the court, but also by the court’s directives to the lawyer acting on behalf of the client. Any theory to the contrary would necessitate, in addition to the appearance of counsel, the appearance of each client before the court. Such a rule would be unworkable. It is emphatically rejected.

In summary, I conclude that what may well have been intended as a directive issued by the district judge in this case was, through no fault of the judge, unclear. Although I should prefer that one exercising the prerogatives, and assuming the heavy responsibilities of a trial lawyer deal more forthrightly with the court, I do not join in affirming sanctions levied for violation of that directive. To that extent, I respectfully DISSENT.



The Federalist Society Profile for Tom Hefferon, partner and co-chair of Goodwin’s Financial Industry Practice, focuses his practice on civil litigation and government enforcement matters, with particular emphasis on the banking and consumer financial services industries. Mr. Hefferon frequently provides compliance advice and litigation risk analysis to industry clients.

Mr. Hefferon has a national practice concentrating on defending prominent financial institutions facing class action lawsuits pending in a large variety of state and federal courts. These cases typically arise under state and federal laws, including the Real Estate Settlement Procedures Act (RESPA), the Fair Housing Act (FHA), the Truth in Lending Act (TILA), the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), the Telephone Consumer Protection Act (TCPA), state and federal unfair and deceptive acts and practices laws (UDAP), other consumer lending statutes and regulations, bankruptcy laws and the common law.

The matters at issue in these cases include fair lending; the legality under RESPA of a variety of business practices; federal preemption; arbitration; assignee liability; loan servicing; foreclosure, bankruptcy and default issues; and claims that challenge various lending practices under a wide variety of federal and state statutes, including UDAP laws. He has an active practice before numerous state and federal courts. In the last several years, Mr. Hefferon and others in the group have defended more than 200 putative class actions, most of which were brought as nationwide class actions, and have been lead counsel in four multidistrict litigation proceedings. He also is acting and has previously acted as lead counsel to mortgage industry trade associations appearing as amicus curiae in cases that present significant issues for the consumer credit industry, and as counsel to trade associations in connection with regulatory comment letters.




Confidential Witness Hearings in SunTrust and Lockheed Martin Demonstrate Need for Reforms

By Lane Powell PC
Oct 24, 2012

Douglas W. Greene]Plaintiffs’ lawyers are facing intense judicial scrutiny of problems with their use of “confidential witnesses” (“CWs”) in the Lockheed Martin and SunTrust securities class actions. Courts have recently addressed similar CW problems in two other high-profile securities class actions.

Sears Holdings(affirmed by the Second Circuit) and Boeing Courts need to scrutinize CWs more closely in deciding motions to dismiss – not just in post-denial motions for reconsideration or summary judgment following CW discovery.

After discussing the two current cases, I propose two modest reforms.Belmont Holdings v. SunTrust BanksIn SunTrust, the court denied defendants’ motions to dismiss the First Amended Complaint (“FAC”), based primarily on purported claims from a CW, Mr. Trapani, that the individual defendants knew that certain financial reporting at the end of 2007 was false.*

Mr. Trapani left SunTrust in August 2007, but the FAC alleged that Mr. Trapani worked at SunTrust from “2005 through 2007” and contained several references to information he provided concerning knowledge “throughout 2007.”

During the motion to dismiss process, SunTrust asserted that Mr. Trapani left SunTrust in August 2007.

The court acknowledged the assertion but expressly left the issue for later, stating it “must assume Trapani had personal knowledge” and if he does not, “the Court will consider later whether these allegations support a violation of the pleading standards under the Federal Rules of Civil Procedure.”

Defendants moved for reconsideration based on declarations from Mr. Trapani that he left SunTrust in August 2007, knew nothing about the challenged financial reporting thereafter, and never told plaintiffs’ investigator that he discussed the individual defendants’ knowledge of SunTrust’s financial reporting thereafter.

Based on Mr. Trapani’s declarations, the court reconsidered its motion to dismiss order and dismissed the action.

The court “reluctantly” decided against sanctions because it appeared that notes from plaintiffs’ investigator, Ms. Torres, supported the FAC’s allegations based on Mr. Trapani. So it appeared that plaintiffs’counsel was off the hook.

But they might not be.

Ms. Torres contacted the court to say she was concerned about the accuracy of plaintiffs’ counsel’s arguments against sanctions. In particular, she “stated that she had information she wished to share with the Court, including that Plaintiff’s counsel were involved in the interviews of Mr. Trapani and that, in those interviews, Mr. Trapani made clear that he did not have any knowledge after August 2007 ….”The court has set a hearing for November 9, 2012 to hear more from Ms. Torres, her firm, and the parties. “The Court will, after the proceeding, evaluate whether further inquiry or action is required.”

City of Pontiac General Employees’ Retirement System v. Lockheed Martin

In Lockheed, Judge Rakoff denied defendants’ motion to dismiss. Discovery commenced. Discovery of the CWs revealed two categories of problems: (1) several CWs disputed telling plaintiffs’ investigator the facts the complaint attributed to them; and (2) certain of the CW allegations were not based on the CWs’ personal knowledge because the information they provided was outside of their employment dates and/or job responsibilities.

Defendants moved for summary judgment, pointing out the flaws with the CW allegations on which Judge Rakoff relied in denying defendants’ motion to dismiss.

On October 1, 2012, Judge Rakoff held a day-long evidentiary hearing to determine “who the heck tried to pull a fraud on this court.” The 218-page hearing transcript allows a rare look into the securities-class-action-complaint-preparation kitchen. Plaintiffs and defendants submitted post-hearing briefs that slice and dice the complaint’s allegations and evidence revealed during discovery and during the October 1 hearing.

At the hearing’s conclusion, Judge Rakoff offered some tentative thoughts about the witnesses’ credibility. He remarked that some CWs were credible and others were not, and that plaintiffs’ investigator was credible “on the whole.”

For more background, see here.

The CW Hearings in SunTrust and Lockheed Martin Demonstrate Two Problems with CW Allegations

Problem One: The first problem is the “who in the heck tried to pull a fraud on this court” problem – CWs who claim not to have told plaintiffs’ investigators the information the complaint attributes to them.

Although it’s not unusual for there to be differences between the complaint’s allegations and what the CWs later say, allegations of fabrication are not common. But, based on the recent cases of potential fabrication, I anticipate that some people might suggest a partial lifting of the discovery stay for depositions of CWs during the motion to dismiss process. I would hesitate to favor such an approach in all cases because it could undermine the defendants’ discovery stay – e.g. it’s hard to strictly confine the CWs’ answers to what they told plaintiffs’ investigators – and thus could do more harm than good in some cases. However, in a case of potential fabrication, and where defense counsel can’t adequately deal with the allegation through motion to dismiss arguments, then I say go for it.

Some might suggest severely limiting the weight to be placed on CWs, or even doing away with their use. Following Tellabs, some courts, including the Seventh Circuit in Higginbotham v. Baxter International, found that an “upshot” of Tellabs is that allegations from anonymous sources must be heavily discounted, and “[u]sually that discount will be steep.” However, in the second Tellabs decision, the Seventh Circuit distinguished Higginbotham on the basis that the problem there was that plaintiffs’ complaint failed to describe the CWs sufficiently – a problem thatdidn’t exist with the Tellabs plaintiffs’ complaint. Since that decision, judicial focus hasgenerally beenon the adequacy of CW descriptions.

Problem Two: Inadequate description of CWs’ employment dates and job responsibilities is the root of the second problem raised by SunTrust and Lockheed. The CWs’ employment dates and job responsibilities are necessary to lay a foundation for the information attributed to a CW so that the court can determine that the information is reliable enough to be probative and, if it is, how probative.

If the complaint accurately describes employment dates and responsibilities,most CW allegations are tame: a lower-level employee with narrow responsibilities opines about company-wide problems; an employee switched to an irrelevant position before the events about which he provides information; an employee provides second- or third-hand information; or someone responsible for Division X opines about Division Y. Courts usually have no problem disregarding or discounting such allegations.

Problems occur, however, when the complaint’s CW descriptions are inaccurate or vague, or fail to plead how the CW knows the alleged information. Even withinsufficient descriptions, it isoften possible to figure out the CWs’ identities, but defendants are arguably unable on a motion to dismiss to introduce the real facts so that the court can appropriately disregard ordiscount the CW allegations.SunTrustis a good example of this problem. The defendants pointed out that Mr. Trapani left the company in August 2007. The court appreciated the possibility that the defendants were right, but deferred the issue because of its view that it didn’t have the ability to sort that out on the motion to dismiss.

Two Suggested Reforms

Suggestion One: To address Problem One, the “who the heck tried to pull a fraud on this court” problem, plaintiffs’ counsel should be required to obtain declarations from the CWs. Plaintiffs’ counsel’s likely objection to such a requirement would be that it would deter CWs from cooperating because some won’t want to be involved in the litigation in such a formal way. But a candid plaintiffs’ lawyer should inform CWs that courts increasingly require disclosure and discovery of CWs, so they will become formally involved in the litigation anyway if the defendants’ motion to dismiss is denied.

Plaintiffs’ investigator in Lockheed testified that his practice is to tell CWs that he “can’t guarantee . . . that their names might not be revealed later as the litigation progresses” and that it is “possible that further involvement would be obliged of them as the case progresses in discovery.”

Declarations would significantly enhance the accuracy of CW information; what someone is willing to say “anonymously” over the phone can be much different than what he or she will say under penalty of perjury, and plaintiffs’ counsel’s description of CW information in the complaint would better hew to the facts the CWs actually provided. Plaintiffs’ counsel should welcome such a requirement, or only mildly protest it; declarations would protect them from disputes such as those that they are having with the CWs in SunTrust and Lockheed.

Such disputes can arise quite innocently – for example, through a misunderstanding or miscommunication during the interview, an error in preparing the interview memo, or a misinterpretation of the interview memo by the lawyer drafting the complaint.

An alternative to a declaration requirement, though probably somewhat less effective, would be verifications from each CW that he or she has read the complaint and approves as true and fairly stated (1) the description of his or her employment dates and job descriptions and(2) the allegations attributed to him or her, and (3) that the complaint does not omit facts that the CW believes are important for a fair understanding of the information he or she provided.

A third alternative, but less effective than the first two, would be certifications by plaintiffs’ counsel, as part of his or her Rule 11 obligations, that each CW has verified each of these three items to plaintiffs’ counsel. A fourth alternative would be for plaintiffs’ investigator to verify that the complaint accurately and fairly states the information obtained from the CWs and does not omit information that is important for a fair understanding of what they said.

These suggestions are consistent with the rationale of the Second Circuit’s decision in Sears Holdings, which upheld the district court’s use of deposition testimony to assist the district court in resolving defendants’ motion to dismiss:

The anonymity of the sources of plaintiffs’ factual allegations concerning scienter frustrates the requirement, announced in Tellabs, that a court weigh competing inferences to determine whether a complaint gives rise to an inference of scienter . . . . Because Fed.R.Civ.P. 11 requires that there be a good faith basis for the factual and legal contentions contained in a pleading, the district court’s use of the confidential witness’ testimony to test the good faith basis of plaintiffs’ compliance with Tellabs was permissible.

The court made no credibility determinations, nor did it weigh competing testimony. To the contrary, it relied upon the deposition testimony for the limited purpose of determining whether the confidential witnesses acknowledged the statements attributed to them in the complaint. Under these circumstances, we identify no error.

Suggestion Two: To address Problem Two, poor CW descriptions, plaintiffs should be required to precisely describe, at a minimum, the following information for each CW: (1) employment dates – by day, month, and year; (2) employment responsibilities – including job title, job description, and a detailed list of job responsibilities, and the substance and exact date of any changes; and (3) how the CW knows the information the complaint alleges.

There can be no reasonable objection to CWs providing these facts. With regard to employment information, CWs know it precisely and, if they don’t recall precisely, they have documents that reflect it. With regard to the basis of knowledge, if the CWs can’t recall the basis, there’s no good reason to credit the other information the complaint alleges. Indeed, under current law, vagueness in these three areas undermines the CW allegations.

If plaintiffs do not precisely plead employment information or if they plead inaccurate employment information, defendants should be entitled to submit targeted employment information that demonstrates that a CW lacks knowledge of the information the complaint pleads about him or her.

For example, in SunTrust, imagine the resources the court and parties would have saved had the court simply considered a simple employment document demonstrating that Mr. Trapani left SunTrust in August 2007.

That would have left plaintiffs only with the ability to ask the court to infer that Mr. Trapani had post-employment conversations with the individual defendants. At that point, I like defendants’ chances of convincing the court to disregard plaintiffs’ requested inference on the grounds that it isn’t supported by facts, is speculative, and implausible.

* Plaintiffs’ only claims wereSecurities Act claims, which do not require proof of scienter, but the individual defendants’ state of mind was relevant because the challenged statements concerned reserves, which are statements of opinion and thus false only if they are not genuinely believed. Rule 9(b) applied, the court ruled, because the allegations sounded in fraud.

John J. Craven Jr.; anchored city’s Juvenile Court

By J.M. Lawrence Globe Correspondent,December 20, 2011, 12:00 a.m.


In 23 years on the bench in Boston Juvenile Court, Judge John Joseph Craven Jr. saw scores of troubled families and children. In one case, he ordered a child taken away from a drug-addicted mother and counseled her to get well. Though she never conquered addiction, she sent the judge a large portrait of Our Lady of Perpetual Help.

“She never blamed my father for taking her son away, but came to visit my father in court to hear him tell her that she could turn her life around,’’ said Judge Craven’s daughter, Katherine.

Judge Craven, who had been an assistant attorney general and a clerk of the Boston Municipal Court and served on the Boston School Committee in the early 1970s, died Nov. 22 in Epoch Senior Healthcare of Chestnut Hill of complications of Lewy body dementia. He was 76 and had lived in West Roxbury.

“I found him to be one of the dearest, kindest, most compassionate people I’ve ever crossed paths with,’’ said Chief Justice Roderick Ireland of the Massachusetts Supreme Judicial Court, who worked with him for 13 years. “He was a hard-working guy, a decent man, a great friend, and a wonderful colleague. He lifted everybody up.’’

Born in Roxbury in 1935, Judge Craven could recall listening to John F. Kennedy’s grandfather, John “Honey Fitz’’ Fitzgerald, sing “Sweet Adeline’’ at the piano in the Parker House when Boston’s Irish Americans made their way up the ladder of success through the voting booth.

Both of Judge Craven’s parents held office. His father, John Sr., was a state representative and his mother, Katherine, had 11 children before she became, in 1963, the first woman ever elected to the Boston City Council on a citywide vote. Judge Craven was their third child and their first son.

A baseball fan from a young age, he could recall going to Fenway Park with his father for the 1946 All Star Game and seeing Ted Williams hit the only home run ever hit off of the Pittsburgh Pirates’ Rip Sewell’s famously slow “eephus pitch,’’ his family said.

He graduated from Roxbury Latin School in 1952 and from Harvard College in 1956.

Judge Craven cleaned trolley cars at night to help pay for his legal education at what is now the New England School of Law, from which he graduated in 1962. He also served in the US Army.

“He really made my parents proud,’’ said his sister, Sheila Middleton of Milton. “He just wanted to learn. He was a great student, and he always was involved, always learning, always asking people what did they think. He was a great student of all of these long-gone politicos.’’

His favorite date on the calendar was Election Day, his family said, though he lost bids for lieutenant governor, Suffolk County sheriff, Boston City Council, and state Senate over the years. He was elected to the governor’s eight-member Executive Council in 1966.

As Judge Craven lobbied for appointment as clerk of the Boston Municipal Court, some political columnists nicknamed him Doughnuts Craven for his habit of visiting the Dover home of Francis W. Sargent, then the governor, with a dozen fresh doughnuts on Sundays. Sargent appointed him Municipal Court clerk in 1973.

“He accomplished his goal by literally waylaying the governor every day and begging for a job,’’ Globe columnist David Farrell wrote that year.

Governor Edward J. King appointed him to the Juvenile Court bench in 1982.

“My baby clothes have many pin holes from where a button for a particular candidate once adorned the dress,’’ his daughter, Katherine, who is executive director of the University of Massachusetts Building Authority, said in a eulogy at her father’s service late last month.

“My father cared deeply about Boston and making it a better place, particularly through politics,’’ she said.

He never went anywhere without donning a shirt and tie. One of his familiar bits of advice to his children and grandchildren was: “You’ve got to look good, talk good, and smell good, and only then will people give you some credit for having some brains.’’

Judge Craven, who retired in 2005, enjoyed joking and telling stories about all the politicos he had known, friends said. He met 17 Massachusetts governors in his lifetime.

“He taught me quite a bit about politics, but the thing that impressed me was what a decent human being he was,’’ Ireland said.

From the bench, he often would tell juvenile defendants they needed to get an education and should master math and English.

His rulings were sometimes controversial. In 1992, he took a boy out of foster care and sent him to live with his father, who had already abused him and lost custody to the state Department of Social Services. Judge Craven cited the recommendation of a court-appointed investigator as the basis for his decision to return the child to his father. “The bottom-line goal is to try and unify the family,’’ Judge Craven said.

He was married 41 years to the former Patricia McCarthy. They met when he was doing pro bono legal work and handled the probate work for the estate of one of her relatives, according to his family. They had three children.

Judge Craven was deeply devoted to his daughter Patricia Mary, who was born with Down syndrome. He and his wife resisted doctors’ advice in 1976 to place her in an institution, said Katherine.

At family parties, Judge Craven could be found laughing and joking with Patty and helping her eat dinner. “She was the light of his life,’’ his sister said. “They went every place together.’’

Deeply religious, Judge Craven liked to listen to radio broadcasts of the Rev. Joseph E. Manton from Roxbury’s Mission Church, formally known as the Basilica of Our Lady of Perpetual Help. At his home, his frequent kisses on statues and pictures of the Blessed Mother left marks, according to his family. “His first instinct was to trust God in all things,’’ Katherine said.

In addition to his wife, daughters, and sister, Judge Craven leaves a son, John R. of West Roxbury; four other sisters, Patricia Ross of Dedham, Maureen Slade of Hyde Park, Kathleen Passanisi of Quincy, Barbara Broderick of Quincy; two brothers, Brendan of Quincy and Timothy of Dedham; and six grandchildren.

A funeral Mass was said at St. Theresa of Avila Church in West Roxbury. Burial was in Mount Benedict Cemetery in West Roxbury.


Attorney, Boston

Laura Craven is a senior attorney in the firm’s Litigation Department. Ms. Craven specializes in business litigation, with an emphasis on consumer financial services litigation. She joined Goodwin in 2005.

Ms. Craven was recognized as a Massachusetts Super Lawyer “Rising Star” by Law & Politics and Boston magazine from 2007-2010.

Prior to joining Goodwin, Ms. Craven was an associate in the Litigation Practice Group at Testa, Hurwitz & Thibeault in Boston.

As an attorney in the Consumer Financial Services Litigation Practice, Ms. Craven defends financial institutions in state and federal consumer lending litigation. Ms. Craven has also defended companies and individuals in securities class action lawsuits, shareholder derivative litigation and a variety of other complex business litigation matters. She has also worked on both internal and governmental investigations concerning federal securities laws, accounting issues and health care fraud.



J.D., 2001
Northeastern University School of Law
B.A., 1998
University of Massachusetts Amherst
(magna cum laude)

2001 to 2002 Massachusetts Superior Court
U.S. Court of Appeals for the First Circuit
U.S. District Court for the District of Massachusetts
U.S. District Court for the District of Colorado

Obituary: The Honorable John J. Craven, Jr.

By Lorraine Emanuel, Neighbor
Nov 27, 2011 2:08 am ET

The Honorable John J. Craven, Jr. 76, of West Roxbury, died from complications of Lewy Body Dementia on Tuesday, November 22, 2011.

Beloved husband of 41 years of Patricia (McCarthy) Craven.

Adored father of Katherine Craven Kryzanski and her husband, Dr. James Kryzanski of Chestnut Hill;

John Robert Craven, Esq. and his wife, Laura Stock Craven, Esq. of West Roxbury;

and his beloved special daughter, Patricia Mary Craven of West Roxbury.

Devoted “Grandfafal” to Delia Mary Kryzanski, Joseph John Kryzanski, James Henry Kryzanski, John Francis Xavier Kryzanski, Jane Elizabeth Craven and Rose Charlotte Craven, and the late Mary Erin Kryzanski. Beloved son born in Roxbury on February 27, 1935 to the late state representative John J. Craven, Sr and the late former Boston city councillor Katherine (Kane) Craven.

Cherished “Brother” of Patricia Ross of Dedham, Maureen Slade of Hyde Park, Sheila and James Middleton of Milton, Kathleen Passanisi of Quincy, Barbara Ellen and Jay Broderick of Quincy, Brendan Michael and Diana Craven of Quincy, Timothy and Nina Craven of Dedham, and the late Pauline Qazilbash, Francis Xavier Craven, and Susan Borek. Beloved Uncle John to over 50 nieces and nephews, and many grandnieces and grandnephews and cousins. The “Judge” was a great friend and mentor to many.

Retired judge after 23 years of the Boston Juvenile Court, former Clerk of the Boston Municipal Court, former Boston School Committee member and Governor’s Councillor, former Massachusetts Assistant Attorney General, former teacher at Boston State College and Woburn High School. Proud graduate of the Roxbury Latin School Class of 1952, Harvard College Class of 1956 and New England School of Law Class of 1962. Admitted to Massachusetts Bar in 1962. Member of the Harvard Club of Boston for over 55 years. Owned Park League baseball teams in the late 1960’s. Avid booster of the Harvard University Marching Band, season ticket holder of Harvard Football and Harvard Hockey. Met 17 Governors of Massachusetts in his lifetime, receiving two gubernatorial appointments. Devoted Roman Catholic with special dedication to Our Lady of Perpetual Help. Veteran, United States Army.

The Craven family welcomes friends and loved ones to celebrate his life on Monday, Nov. 28, 2011, in the Gormley Funeral Home, 2055 Centre Street, West Roxbury from 3 – 9 p.m. A Funeral Mass will be celebrated on Tuesday, Nov. 29, 2011 at 10 a.m. at St Theresa of Avila Church, West Roxbury. Burial will follow in Mt. Benedict Cemetery.

Katherine Craven’s credo: ‘Let’s make things work’

If you drop the name “Katherine Craven” into any discussion with key players in academic and public service circles in Massachusetts, the air is quickly filled with words like “model public servant; sound judgment; unquestioned expertise; tireless work style; advances the public interest; impeccable credentials; boundless energy; impressive creativity.” And while “saintly” doesn’t make the list, one admiring associate calls her “a Joan of Arc” for her “intellect, forcefulness, and ethical approach to her goals in life and at work.”

Taking note of those qualities in her announcement last February that Ms. Craven, at the time executive director of the University of Massachusetts Building Authority, would be leaving public service for academia, Kerry Healey, the president of Babson College, said that her “20-year track record in government and higher education, and her highly regarded approach to team building and community engagement, makes her an exceptional fit to lead our administrative and business operations during this critical time.”

The title of chief administrative officer (CAO) of Babson College is the latest in a string of high-level Katherine P. Craven appointments fetching back to her days as a manager with the men’s hockey team at Harvard. In the early years of the new century, she was, at age 23, a budget analyst for the Ways and Means Committee of the Massachusetts House of Representatives, and later the director of policy for the House where she counseled then-Speaker Thomas Finneran and the membership on the financing of significant legislative initiatives born out of the state’s $23 billion operating budget. She moved on in 2004 to serve as executive director of the Massachusetts School Building Authority, where she oversaw an outlay of $3 billion spending on K-12 schools and accepted a specific challenge:

“We had to revamp the entire state school building program. With a 90 percent state reimbursement, some school districts were getting six to eight lavish schools. There was a lot of waste and huge debt. No real budgets or planning were at play. Schools were built that never should have been built. There was no consistency. You leave things open for fraud when things happen like that. So we instituted checks and controls. We changed the culture.”

In 2010, Ms. Craven added the title of deputy state treasurer to her resume while remaining at the authority. The next year, she was named to head the UMass Building Authority, in which post she and her associates took up oversight of a $3.8 billion plan to modernize the University of Massachusetts campuses in Amherst, Boston (Dorchester), Dartmouth, Lowell, and Worcester for the benefit of some 70,000 students, 5,700 faculty, and 12,000 professional and classified staff.

And the beat goes on. Late last year, the newly elected mayor of Boston, Martin Walsh, managed to persuade her to join his transition team. And in August of this year, Gov. Deval Patrick named Ms. Craven to the Board of Elementary and Secondary Education, citing her experience as evidence that she and her associates “will continue to be great partners in our efforts to close the achievement gap and ensure that all of our students are prepared for future success.”

Given all the above, it seems reasonable to ask: Who is this 41-year-old wonder woman, and where did she come from?

William Shakespeare once wrote, “It is a wise father that knows his own child.” The late Boston Juvenile Court Judge John J. Craven, a member of the Boston School Committee and Governor’s Council in the late 1960s and early 1970s, knew his daughter Katherine the way a literary genius knows the denouement of a great work. Through the collective wisdom of an extended family marinated in Boston politics and public service, Judge Craven passed down to his daughter the essence of the Irish: wit, a sturdy work ethic, and perseverance.

My father was the center of my universe,” Ms. Craven said in an interview with the Boston Irish Reporter in November 2011, mere hours after his passing on Thanksgiving eve. “He taught me all the things a boy should know.” The loss of her father, she said, was paralyzing. He had struggled long and hard against Lewy Body Dementia, a rapid-onset Alzheimer’s variant that robs a person of memory, thinking, language, and, finally, life itself.
 Symptoms of the disease, a precursor to its final stages, were apparent after her father’s retirement in 2005, she said, but he had the will to fight on with the loving care of family members. She often took her father on trips to familiar places to jog his memory and his spirit –a father/daughter connection that has had staying power for her, she says today.

In many ways, Ms. Craven is a mirror image of her father, a Gov. Edward J. King appointee to the Boston Municipal Court bench, and a composite of her mother, Patricia: humble, resolute, and a person of great vision. 
Raised in West Roxbury, which is something of an Irish waiting room to Heaven, Ms. Craven belonged to a faith-centered family with a younger brother, John Robert, now an attorney with the Boston Water & Sewer Commission, and a younger sister, Patty, who has Down Syndrome. Katherine’s son, Joe, a precious ten year old, also is a Down child. 
For all that and more, faith and perseverance are family currency.

“Someone once described my father as relentless,” she said in the 2011 interview. “I think that’s true. Relentless in the pursuit that his children got the best education possible, and used their God-given gifts to the fullest. My dad was a life coach.”

At Harvard, John J. Craven, Roxbury Latin-educated and with roots in Roscommon, was called the “greasy grind,” a moniker for his “persistent studying; he was very much a perfectionist in that way,” she said. His father, John J. Craven, Sr., a second-generation Irish American, grew up in the “Leaky Roof” section of Roxbury, “a place where all the three-deckers leaked,” said Katherine, and was a state representative from the Roxbury district from 1930-38. His mother, Katherine “Kitty” (Kane), who with John Sr. raised 11 children, was the first woman ever elected citywide to the Boston City Council. A vociferous opponent of urban renewal, she once “tossed an ashtray at a fellow councillor who had insulted her, and called another ‘a bald-headed SOB,’ threatening to poke him in the jaw,” according to a Boston Globe story at the time.

Katherine’s mother Patricia (McCarthy), whose family came from Cork, added needed ballast, humor, and balance to a family driven to public service. The McCarthy name continues to resonate alongside the Craven record in public affairs: Ms. Craven’s cousin, Timothy McCarthy, a Hyde Park resident, served Mayor Thomas Menino as a Neighborhood Services coordinator and is now a member of the Boston City Council.

“My grandparents’ mission and focus was the political world,” Katherine said, “a response to the inability of the Irish back then to break into that line of business in Boston.”

That response was a calling passed down to her father, who served on the Governor’s Council from 1968-70, and on the Boston School Committee from 1970-74. He also ran, unsuccessfully, for numerous other elective offices: lieutenant governor, Suffolk County sheriff, the state Senate and the City Council. A man who had routine and discipline down to a Spartan science, he mentored as much as he monitored. “On the Juvenile Court, my dad always sought ways of helping people,” says Katherine. “But he was a disciplinarian if you weren’t doing the best job possible. He inspired me to go into public service, to never give up. He had a way about him.”

Early on, her dad taught Katherine how to keep Red Sox box scores —a skill of precision she has carried into professional life. “I was terrible in sports,” she conceded. “I didn’t have the eye-hand coordination going, but I knew how to keep score.”
 She has been doing that all her life.

Ms. Craven attended elementary school at Mount Alvernia Academy in Newton and high school at Boston Latin en route to Harvard where she majored in history and worked behind the bench as a manager with the men’s hockey team, a position advocated by her father when he realized his daughter was a better manager than player. While at Harvard, Katherine met her husband, Jim Kryzanski, a neurosurgeon at Tufts Medical Center. The couple has four children: Delia, 14; Joe, 10; James Henry, 6; and John Francis Xavier, 4. Katherine and Jim also lost a child, Mary Erin. “She died as a baby from West Nile virus,” said Ms. Craven in 2011 while noting that she, too, almost died of the disease.

Now it’s back to campus for a woman who apparently sees no sense in slowing down to a moderate pace. There’s always much to be done wherever she finds herself. Asked in a recent interview to compare and/or contrast public life with her few months in academia at Babson, CAO Craven went directly to the positive:

“Working with the people in Legislature and at public authorities made for a proving ground for work in a campus culture,” she said in noting that her responsibilities include oversight of facilities management, information technology, human resources, and community relations. “It’s like running a small town where meetings follow meetings with various constituencies in search of a consensus on what to do about important issues.”

Ms. Craven was asked in 2011 how one goes from being a history major to budget analyst in one swift leap, and she replied: “History is the predictor of the future. You fall back on that skill. That’s the trick of it. You don’t have to be an accountant to be a budget analyst – at the state government level, at the intersection of budgets and policy.”

You apparently also have to be a good juggler of priorities: “She’d come in carrying two briefcases and a baby under her arms,” former Speaker Finneran recalled in a 2010 Globe feature story on his erstwhile counselor. Asked recently to appraise Ms. Craven the person, Finneran replied that she is “sui generis,” a Latin phrase that in her case means you really can’t compare her to anyone else.

Robert K. Sheridan, retired head of SBLI and the author of the “Joan of Arc” designation, seconds the Finneran motion, saying, “Having Katherine Craven on the job is, simply, the best form of insurance any institution can have to ensure its success.”

Today, Katherine Craven looks in the rearview mirror with the training of a historian and to the future with the eyes of the community visionary and the relentlessness that defined her father’s approach to life. “I always strive,” she has been quoted as saying, “to keep my priorities straight, as my dad taught me: family first. I hope in the end that I can make a difference. I hope I can help a lot of people, figure things out, and make things work.”

Katherine Craven P’22 Named Chair of Massachusetts Board of Elementary and Secondary Education
Katherine Craven P’22
By Andy Tiedemann March 27, 2019

Katherine Craven P’22, Chief Administrative and Financial Officer at Babson since 2014, has been appointed Chair of the Massachusetts Board of Elementary and Secondary Education by Gov. Charlie Baker.

The mission of the Massachusetts Board of Elementary and Secondary Education is to strengthen the Commonwealth’s public education system so that every student is prepared to succeed in postsecondary education, compete in the global economy, and understand the rights and responsibilities of American citizens, and in so doing, to close all proficiency gaps.

“Katherine is an experienced educational leader who cares deeply about expanding opportunity for every community and every child in the Commonwealth. Her deep knowledge of state government and her commonsense approach to policymaking and problem solving will be a tremendous asset to the Board and the Department in her new role. I am so thankful for Katherine’s willingness to accept this new challenge,” said Secretary Education Secretary James Peyser in a press release.

Craven currently serves as the chief administrative and financial officer of Babson College, the top-ranked college for entrepreneurship education. She began her career in state budget analysis, planning and policy, helping deliver more than 10 state budgets for the Massachusetts House of Representatives Committee on Ways and Means.

“Katherine is an accomplished and experienced leader with a long history of supporting and championing education at all levels,” said Babson President Kerry Healey. “I am so pleased and proud that she has been named Chair of the Board of Elementary and Secondary Education, and I know that she will be a valuable advocate and resource for Massachusetts schools, families and communities.”

“I am honored and grateful for the support of the Baker-Polito administration. I look forward to continuing the great work of Chairman Sagan and the Department of Elementary and Secondary Education to promote forward-thinking policies providing educational opportunity for nearly 1 million children of all different learning styles and socio-economic backgrounds across the Commonwealth to succeed in an ever-changing world,” Craven said.

In 2004, Craven was appointed as the founding executive director and chief executive officer of the Massachusetts School Building Authority, where she won plaudits for her effective management and leadership.

While leading the School Building Authority, Craven was also named First Deputy Treasurer of the Commonwealth. Craven left the School Building Authority and the Treasurer’s Office in 2011 when she was appointed executive director of the UMass Building Authority and assistant vice president for capital finance for the University of Massachusetts.

She is a member of many local government and community organization boards, such as the Dorchester Boys and Girls Club, the Massachusetts Down Syndrome Congress, the Committee for Public Counsel Services, the Massachusetts Business Roundtable, and Women in Public Finance. Craven received a Bachelor of Arts in History from Harvard University. She lives in Brookline, with her husband and five children.

CFPB Respond to PHH Ocwen’s Claims

Ocwens’ Consent Judgment had two sets of obligations: complying with federal and state law, and complying with the fencing-in provisions.

Ocwen Respond to CFPB’s Arguments at the Court of Appeals for the Eleventh Circuit

Even under a traditional res judicata approach, Marra appropriately considered the terms of the Consent Judgment. CFPB’s claims are barred.

CFPB Argue Against Res Judicata at the Court of Appeals for the Eleventh Circuit

Judge Marra’s analysis of the res judicata effect of the Consent Judgment using traditional principles shows that method is inappropriate.

Rules of Professional Conduct When Engaging Witnesses
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