Commercial Litigation and Arbitration

Absent Class Members’ Right of Access to Class Counsel’s Files Depends on Their Stake in the Outcome and Demonstrable Need for the Materials

Updating our post of December 28, 2007 (reporting the intermediate appellate court's decision): From Wyly v. Milberg Weiss Bershad & Schulman, LLP, 12 N.Y.3d 400 (N.Y. Ct. App. 2009):

Petitioner Sam Wyly was an absent class member in a federal securities class action lawsuit; an absent class member is a member of a putative or certified class who is not a named party.... Respondents Milberg Weiss Bershad & Schulman, LLP; Stull, Stull & Brody; and Schiffrin & Barroway, LLP (collectively, the law firms) served as class counsel in the litigation. In this appeal, we are asked whether Wyly — like a represented party in traditional individual litigation — enjoys a presumptive right of access to the law firms' case files upon the representation's termination (see Matter of Sage Realty Corp. v Proskauer Rose Goetz & Mendelsohn, 91 NY2d 30, 689 N.E.2d 879, 666 N.Y.S.2d 985 [1997]). We hold that Wyly does not possess a presumptive right of access, and further conclude that the Appellate Division did not abuse its discretion when it denied Wyly access to the requested records.


[Ttwo general propositions emerge from the case law: "class counsel do not possess a traditional attorney-client relationship with absent class members" (Matter of Community Bank of N. Va., 418 F.3d 277, 313 [3d Cir 2005]); and they represent the interests of and owe a fiduciary duty to the entire class (see Daniels v City of New York, 199 FRD 513, 515 [SD NY 2001]; Matter of Shell Oil Refinery, 152 FRD 526, 528 [ED La 1989]). In sum, while absent class members are clients of class counsel, they are a unique species of client.

In our view, the class counsel-absent class member relationship is simply too unlike the traditional attorney-client relationship to support extending the Sage Realty presumption to absent class members. We justified the Sage Realty presumption in part because it "more closely conform[ed] to the position taken by the courts of this State on the client's broad rights to the contents of the file" when the attorney is dismissed on a matter still pending (Sage Realty, 91 NY2d at 36). In a class action, however, an absent class member does not possess a "broad right[]" of access to the files of a class counsel dismissed by the trial court during the litigation's pendency. Further, a class action by its very nature may involve thousands of absent parties who are geographically dispersed. As a consequence, to endorse the Sage Realty presumption in this context would create "the potential for class counsel to be unduly burdened, even after the end of litigation, by a multitude of requests from absent class members for counsel's entire file" (Wyly, 49 AD3d at 92).

We are especially mindful of the paramount role the trial court plays in managing a class action and protecting the rights of absent class members (see Greenfield, 483 F2d at 832 ["[U]ltimate responsibility of course is committed to the district court in whom, as the guardian of the rights of the absentees, is vested broad administrative, as well as adjudicative, power"]). Indeed, in appointing class counsel in the first instance, a federal court must take into account numerous factors bearing on the adequacy of the prospective representation (see FRCP 23[g]). This unusually high degree of judicial involvement and responsibility is another distinctive feature of a class action, which sets it apart from traditional litigation. It both diminishes an absent class member's need for access to class counsel's files, and provides an alternative avenue to obtain them. We therefore conclude that where an absent class member brings a CPLR article 4 special proceeding seeking access to class counsel's litigation files after termination of the representation, Supreme Court must first consider how much the absent class member has at stake. If (as the parties do not dispute here) the absent class member has a substantial financial interest in the class action's outcome, the court must then decide whether the absent class member has demonstrated a legitimate need for the requested documents.

In this case, the Appellate Division decided that Wyly had not made an adequate showing to compel the law firms to produce their files; in particular, the law firms' work product and analysis relating to the class actions. Wyly sought these documents to support the Wyly movants' Rule 60(b) motion and his malpractice action against the law firms, allegedly for settling the class actions too cheaply. As the Appellate Division observed, however, the District Court long ago granted Wyly access to the 23 boxes that apparently triggered his suspicions of fraud in the first place. When Wyly was unable to convince the District Court that anything in the 23 boxes, in fact, suggested fraud, the Judge declined to order further discovery or to reopen the 2003 settlement. The District Court, which supervised the class actions and has retained jurisdiction, is responsible for protecting the interests of absent class members, which includes monitoring the adequacy of class counsel's performance. We cannot say that the Appellate Division abused its discretion by, in effect, declining to second-guess the District Court's judgments.

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