Jan. 14, 2013 – Recently, a defendant facing potential liability of $5 million under the federal Junk Fax Protection Act’s restriction on unsolicited fax advertisements argued that class certification should be denied because the spearheading lawyers engaged in unethical conduct.

But a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit Court ruled that denial of the class based on alleged attorney misconduct was not warranted.

The Chicago-based law firm of Anderson & Wanca was investigating four potential class action lawsuits when it learned that the defendant businesses had contracted with Business-to-Business Solutions (B2B) to “fax blast” advertisements to recipients without permission.

In discovery, the firm obtained a list of recipients that received unsolicited fax advertisements commissioned by the defendants named in those specific cases.

But B2B’s records listed countless other fax recipients with potential claims under the Junk Fax Protection Act. Anderson & Wanca took steps to obtain the entire list.

Eventually, the law firm subpoenaed Joel Abraham, the son of B2B's owner, ordering production of B2B’s back-up disks and hard drives containing the fax recipient list. According to a three-judge appeals panel, the B2B files contained a “treasure trove” of potential new clients.

After obtaining the records, the firm began sending solicitation letters to recipients of B2B’s fax blasting, informing them that they could receive compensation as recipients of junk faxes. As a result, the law firm filed over one hundred putative class action lawsuits in federal court.

One defendant, McKnight Sales Company, challenged those class certifications, alleging that Anderson & Wanca engaged in misconduct and unethical behavior that disqualified the firm as adequate class counsel under Rule 23 of the Federal Rules of Civil Procedure.

Defendants primarily argued the firm breached promises of confidentiality in using the B2B records to solicit potential clients, and sent misleading solicitation letters.

The U.S. District Court for the Eastern District of Wisconsin ruled the firm could adequately protect the interests of the class, and granted certification. McKnight appealed.

In Reliable Money Order Inc. v. McKnight Sales Co. Inc., No. 12-2599 (Jan. 9, 2013), the U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s certification, relying on the class certification standard adopted in a 2011 case known as Ashford Gear II.

In Ashford Gear II, the court held that “[m]isconduct by class counsel that creates a serious doubt that counsel will represent the class loyally requires denial of class certification.”

But the allegedly unethical conduct at issue did not raise serious doubt about Anderson & Wanca’s ability to represent the class loyally, the three-judge appeals panel ruled.

“[U]nless the violation prejudices one of the parties or undermines the court’s ability to resolve the case justly, state bar authorities – not a court – should enforce the rules and sanction the attorney,” wrote Judge Joel Flaum.

The defendant McKnight argued that allowing certification of the class would incentivize aggressive and unethical attorney conduct, but the panel disagreed.

“[T]his scenario of unpunished, inappropriate attorney action results only if the litigants and fellow members of the bar fail to refer legitimate instances of attorney misconduct to the relevant bar authority for investigation,” Judge Flaum wrote.