Fechter v. HMW Industries

117 F.R.D. 362, 1987 U.S. Dist. LEXIS 7897
CourtDistrict Court, E.D. Pennsylvania
DecidedAugust 31, 1987
DocketCiv. A. No. 87-506
StatusPublished
Cited by10 cases

This text of 117 F.R.D. 362 (Fechter v. HMW Industries) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fechter v. HMW Industries, 117 F.R.D. 362, 1987 U.S. Dist. LEXIS 7897 (E.D. Pa. 1987).

Opinion

MEMORANDUM AND ORDER

HUYETT, District Judge.

This action arises from the termination of a pension plan known as the HMW, Inc. Cooperative Retirement Plan for Salaried Employees, as amended June 1, 1981 (“the Plan”) and the subsequent distribution of the Plan’s assets. Plaintiffs are former Plan participants. Defendants are Hamilton Technology Inc. (“HamTech”), plaintiffs’ employer, HMW Industries (“HMW”), the parent company of HamTech, Clabir Corporation (“Clabir”) who acquired HMW prior to the termination of the Plan, Gloria G. Strantz, an employee of General Defense Corporation who administered the Plan, Kenneth R. Bernhardt, the Chief Executive Officer of HamTech, and Henry D. Clarke, Jr., Clabir’s Chief Executive Officer and largest shareholder.

On March 21, 1984, an application to terminate the Plan was filed with the Pension Benefit Guaranty Corporation (PBGC). Following approval by the PBGC, the Plan [363]*363was terminated in May, 1985. In August and September, 1985, HMW distributed $1,705,492 in excess assets to Plan participants; $7,925,756 reverted to HMW.

During the pendency of the application to terminate the Plan and after approval of termination by the PBGC, Richard Blakinger, a Plan participant, wrote a series of letters to Gloria Strantz, HMW executives and the PBGC challenging the distribution of the Plan’s assets. Mr. Blakinger became a Plan participant by virtue of his employment from 1950 to 1971 as in-house counsel and later as president of the predecessor to HMW. Because of Mr. Blakinger’s high level jobs, he was the recipient of one of the largest amounts of the excess assets distributed and he has one of the largest claims in this litigation. Mr. Blakinger is also the senior partner in the firm of Blakinger, Byler, Grove, Thomas & Chillas, P.C. (“the Blakinger firm”), which represents plaintiffs in this action.

In his letters, Mr. Blakinger presented detailed legal and mathematical analyses questioning the Plan’s distribution. These letters were written on the Blakinger firm’s stationery and were signed by “Blakinger, Grove & Chillas, P.C.” and by “Richard J. Blakinger”. In a letter dated June 7, 1985, Mr. Blakinger wrote that Edward Fechter, a plaintiff in this action, had discussed these matters with him and Mr. Blakinger sent copies of some of his letters to Mr. Fechter.

On January 28, 1987, plaintiffs, represented by the Blakinger firm, commenced this action. Plaintiffs allege that the Plan’s assets were unfairly distributed and that defendants breached fiduciary duties owed to plaintiffs. They assert various claims under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et. seq. Pending are plaintiffs’ motion for class certification pursuant to Fed.R.Civ.P. 23(b)(3) and defendants’ motion to disqualify plaintiffs’ counsel from participation in this action. For the reasons stated below, I deny both motions without prejudice.

I. MOTION FOR CLASS CERTIFICATION

Fed.R.Civ.P. 23 sets forth the threshold requirements for the maintenance of a class action. Rule 23(a) provides:

One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately represent the class.

Because I find that Rule 23(a)(4) is not satisfied, I must deny the motion for class certification.

“Adequate representation depends on two factors: (a) the plaintiff’s attorney must be qualified, experienced, and generally able to conduct the proposed litigation, and (b) the plaintiff must not have interests antagonistic to those of the class.” Wetzel v. Liberty Mut. Ins. Co., 508 F.2d 239, 247 (3d Cir.), cert. denied, 421 U.S. 1011, 95 S.Ct. 2415, 44 L.Ed.2d 679 (1975). It is defendants’ burden to establish the inadequacy of representation. Lewis v. Curtis, 671 F.2d 779, 788 (3d Cir.), cert. denied, 459 U.S. 880, 103 S.Ct. 176, 74 L.Ed.2d 144 (1982); Shamberg v. Ahlstrom, 111 F.R.D. 689, 693 (D.N.J.1986).

It appears that the named plaintiffs are similarly situated to the rest of the class and there is nothing which suggests that they will be inadequate representatives. Defendants argue, however, that plaintiffs fail to satisfy Rule 23(a)(4) because the continued participation of plaintiffs’ counsel violates the Code of Professional Responsibility (“the Code”) since Richard Blakinger is a member of the proposed class and was active in raising the issues to be resolved in this litigation. Def. ex. A-C.

The requirement that class representatives fairly and adequately represent the class extends to class counsel as well as to class representatives. In re Fine Paper Antitrust Litigation, 617 F.2d 22, 27 (3d Cir.1980). If counsel should be disqualified [364]*364because of a conflict of interest, then counsel is an inadequate representative of the class’ interest. Id.

Defendants assert that the Blakinger firm must be disqualified according to Kramer v. Scientific Control Corp., 534 F.2d 1085 (3d Cir.), cert. denied sub. nom., 429 U.S. 830, 97 S.Ct. 90, 50 L.Ed.2d 94 (1976). In Kramer, the Third Circuit considered whether plaintiff class’ counsel Kapustin had to be disqualified because counsel was a law partner of Kramer, the class representative. The court held that disqualification was required, not because of any actual wrongful conduct, but because counsel’s representation violated Canon 9 of the Code, which states: “A Lawyer Should Avoid Even the Appearance of Professional Impropriety.” The court recognized that “a class action is a special type of legal proceeding” and stated that its “inquiry becomes necessary only because an attorneys’ fee may emanate from an equitable fund, creating a possible conflict between the interests of the plaintiff class members represented by Kramer and the interest of Kramer’s partner Kapustin in maximizing his award as attorney for the class.” Id. at 1091 (footnote omitted). The court then set forth the following rule:

[N]o member of the bar either maintaining an employment relationship, including a partnership or professional corporation, or sharing office or suite space with an attorney class representative during the preparation or pendency of a 23(b)(3) class action may serve as counsel to the class if the action might result in the creation of a fund from which an attorneys’ fee award would be appropriate.

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Bluebook (online)
117 F.R.D. 362, 1987 U.S. Dist. LEXIS 7897, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fechter-v-hmw-industries-paed-1987.