Thursday, March 3, 2011, 1:20 PM

Group Think: When is the sum less than its parts?

Posted by: Chris Jones

Pursuit as a group has its advantages. One need look no further than wolves or porpoises to understand the advantage of pack hunting. And, it can be appealing to apply pack hunting mentality to consumer finance disputes and claims. Consumer finance class actions are on the rise, and even the most defensible have well-known and largely unavoidable risks.
However, consumer class action is not the subject of this post. No, this one goes instead to the wisdom of banding together a disparate group of Plaintiffs whose claims are factually connected, but all of which have sufficient uniqueness to preclude certificaton of a class, and whose claims are based upon individualized conduct and advanced against different defendants.
This is the circumstance in the companion cases of Thompson v. Bank of America, et al. and 2433 South Blvd. v Bank of America, et al. now pending in the Federal Court for the Eastern District of North Carolina, and which were recently the subject of motions to dismiss. The Plaintiffs, a group of over 60 different individuals hailing from 20 different States and the District of Columbia, and many of whom have different counsel, banded together and sued several different defendants on the basis of numerous claims, many of which require specificity in pleading. Their claims arose out of three different failed coastal land development projects, two of which are in North Carolina and one of which is in South Carolina.
Are there efficiencies to be gained by banding together and pursuing defendants as a pack of like minded individuals? To be sure. Are there cost savings to be had? Likely, yes. However, when pleading misrepresentation and fraud claims, which enjoy a heightened level of practical scrutiny and which require specificity of pleading, the attendant problems should quickly become apparent. How do different property owners plead fraud-related actions against lenders for an alleged scheme arising from alleged statements, representations, action, reliance, etc... that allegedly emanated from different people at different times to different people at different times, concerning different properties and all toward the same end? The answer is it's tough. So tough, in fact, that the 4th Circuit has rejected group pleadings in precisely the type of context the Thompson and 2433 South Blvd. plaintiffs have attempted. (Juntti v. Prudential-Bache Securities, Inc., 1993 WL 138523 (4th Cir., May 1993)). The message? Aggregated allegations fail two of the essential purposes of the Rule 9(b) specificity requirement: (1) they are insufficient to provide a defendant with fair notice of the claim against him; and (2) they are insufficient to protect a defendant from harm to his reputation or good will.
The moral? Group litigation can be a siren song. If your plaintiffs are not sufficiently similarly situated to be certified as a class, then pleading complex claims together will be, at best, difficult and, at worst, a nightmare that results in a Memorandum and Recommendation to dismiss all claims by all plaintiffs, as the Thompson and 2433 South Blvd. plaintiffs recently experienced.
Caveat emptor.

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