Berger v. Compaq Computer Corp, et al

00-20875Court of Appeals for the Fifth CircuitJul 25, 2001

Full text

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 00-20875
_______________
MARK BERGER, ETC., ET AL.,
Plaintiffs,
MARK BERGER,
ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED,
Plaintiff-Appellee,
VERSUS
COMPAQ COMPUTER CORPORATION, ET AL.,
Defendants,
COMPAQ COMPUTER CORPORATION; ECKHARD PFEIFFER; EARL L. MASON;
JOHN T. ROSE; JOHN W. WHITE; ROBERT W. STEARNS; MICHAEL WINKLER;
THOMAS J. PERKINS; J. DAVID CABELLO; MICHAEL HEIL; GREGORY E. PETSCH;
KENNETH L. LAY; BENJAMIN ROSEN; AND RODNEY SCHROCK,
Defendants-Appellants.
_________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________
July 25, 2001

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Before SMITH, DUHÉ, and WIENER,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:
In this securities litigation, the district court
certified a plaintiff class and appointed class
representatives. Because of legal error, we
reverse and remand.
I.
On March 6, 1998, Compaq Computer
Corporation announced that sales from one of
its North American commercial channels were
not meeting expectations and that there would
be price reductions and aggressive promotions
to reduce inventories. About a month later,
Mark Berger, on behalf of all purchasers of
Compaq stock between July 10, 1997, and
March 6, 1998 (the “Investors”), sued Com-
paq and its directors (collectively “Compaq”)
complaining of violations of §§ 10(b) and
20(a) of the Securities and Exchange Act of
1934, 15 U.S.C. §§ 78j(b) and 78t(a), and rule
10b-5 promulgated thereunder, 17 C.F.R.
§ 240.10b-5. The Investors allege, inter alia,
that Compaq attempted to inflate the price of
its stock by fraudulently engaging in “channel
stuffing,” i.e., “overselling” products to
distributors with the knowledge that they
would not be able to resell the products to
end-users at rates consistent with the com-
pany’s own sales.
Thirty-nine members of the putative class
collectively moved for (1) appointment as lead
plaintiffs, (2) approval of their selection of lead
counsel, and (3) consolidation of all related
actions.1 The court granted the motion and
appointed all movants as lead plaintiffs.2 The
1 Under the “lead plaintiff” provisions of the
Private Securities Litigation Reform Act of 1995
(continued...)
1(...continued)
(“PSLRA”), a plaintiff seeking to represent the
class must file, together with the complaint, a
sworn certification stating, inter alia, that the
plaintiff (1) is not acting at the behest of counsel,
(2) is familiar with the subject matter of the
complaint, and (3) has authorized initiation of the
action. 15 U.S.C. § 78u-4(a)(2)(A). The plaintiff
then must give notice of the filing of the class
action, advising class members of their right to
move to serve as lead plaintiffs. Id. at § 78u-4(a)-
(3)(A)(i). The court then must appoint a “lead
plaintiff,” adopting the rebuttable presumption that
the “most adequate plaintiff” (1) has either filed the
complaint or made a motion to be appointed lead
plaintiff, (2) has the largest financial interest in the
relief sought by the putative class, and (3)
otherwise satisfies FED. RULE CIV. P. 23. Id. at §
78u-4(a)(3)(B)(i)-(iii).
2 Although the appointment of such a large
group to serve as lead plaintiff is not before this
court, it is notable that the Securities and Exchange
Commission has taken the position that a group of
investors appointed to serve as lead plaintiffs
ordinarily should comprise no more than three to
five persons. See In re Baan Co. Sec. Litig., 186
F.R.D. 214, 224 (D.D.C. 1999). In that case, the
district court refused to appoint a twenty-member
group, citing the “particular concern [which] arises
when lead plaintiff status is sought by a ‘group’ of
persons who were previously unaffiliated, each of
whom have [sic] suffered modest losses, and who
thus have no demonstrated incentive or ability to
work together to control the litigation.” Id.
Likewise, in In re Waste Mgmt., Inc. Sec. Litig.,
120 F. Supp.2d 401, 413 (S.D. Tex. 2000), the
court concluded that “the strictest approach,
requiring at maximum a small group with the
largest financial interest in the outcome of the
litigation and a pre-litigation relationship based on
more than their losing investment, satisfies the
terms of the [PSLRA] and serves the purpose
(continued...)

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Investors then filed a consolidated amended
complaint, which Compaq moved to dismiss
on various grounds, including failure to meet
the pleading requirements of the PSLRA and
FED. R. CIV. P. 9(b);3 the court denied the
motion to dismiss and a motion for
reconsideration.
While the motion to dismiss was pending,
the Investors moved for class certification.
Although they initially proposed that all thirty-
nine lead plaintiffs serve as class
representatives, that number eventually was
whittled to seven, only four of whom appeared
at depositions. Compaq filed a motion
opposing class certification on the ground that
the Investors “had not satisfied their burden of
showing that the proposed representatives
were directing and controlling this litigation as
required by rule 23 and the Reform Act.” The
district court granted the motion for class
certification and appointed as class
representatives the four plaintiffs who had
appeared at depositions.
Shortly after the certification, Compaq
sought a writ of mandamus from this court di-
recting the district court to dismiss the
complaint on the ground that it did not satisfy
the pleading requirements of the PSLRA.
Compaq also petitioned this court to permit an
interlocutory appeal of the certification order
pursuant to FED. R. CIV. P. 23(f). We denied
mandamus but granted interlocutory review,
and that appeal is before us now.
II.
“We review a district court’s class
certification decisions for abuse of discretion.”
Pederson v. La. State Univ., 213 F.3d 858,
866 (5th Cir. 2000). “[T]he district court
maintains great discretion in certifying and
managing a class action. We will reverse a
district court’s decision to certify a class only
upon a showing that the court abused its
discretion, or that it applied incorrect legal
standards in reaching its decision.” Mullen v.
Treasure Chest Casino, LLC, 186 F.3d 620,
624 (5th Cir. 1999) (citations omitted), cert.
denied, 528 U.S. 1159 (2000). “Whether the
district court applied the correct legal standard
in reaching its decision on class certification,
however, is a legal question that we review de
novo.” Allison v. Citgo Petroleum Corp., 151
F.3d 402, 408 (5th Cir. 1998).
An action may proceed as a class action
only if the party seeking certification4
demonstrates that all four of the familiar
requirements of rule 23(a) are satisfied:
(1) the class be so numerous that joinder
of all members is impracticable;
(2) there be questions of law or fact
2(...continued)
behind its enactment[.]”
3 Under the PSLRA, plaintiffs no longer are
permitted to plead scienter generally; rather, they
must “with respect to each act or omission . . .
state with particularity facts giving rise to a strong
inference that the defendant acted with the required
state of mind.” See 15 U.S.C. § 78u-4(b)(2). Rule
9(b) provides, “In all averments of fraud or
mistake, the circumstances constituting fraud or
mistake shall be stated with particularity.”
4 The party seeking certification bears the
burden of proof. Castano v. Am. Tobacco Co., 84
F.3d 734, 740 (5th Cir. 1996); see also In re Am.
Medical Sys., 75 F.3d 1069, 1086 (6th Cir. 1996)
(reversing the district court because “the practical
effect of the proceeding below was to place the
burden on defendants to disprove plaintiffs’ ‘en-
titlement’ to class certification.”).

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common to the class;
(3) the claims or defenses of the
representative parties be typical of the
claims or defenses of the class; and
(4) the representative parties will fairly
and adequately protect the interests of
the class.
FED. R. CIV. P. 23(a). The main issue in this
appeal is whether the Investors carried their
burden on the fourth requirement.5
Rule 23(a)’s adequacy requirement
encompasses class representatives, their
counsel, and the relationship between the two.
See 7A CHARLES A. WRIGHT, ARTHUR R.
MILLER & MARY KAY KANE, FEDERAL
PRACTICE AND PROCEDURE § 1769.1, at 375
(2d ed. 1986). Compaq neither challenges the
adequacy of class counsel nor contends that
any conflict between the representatives and
the class members precludes certification, so
the question is whether the court applied the
correct legal standard in determining the ade-
quacy of the class representatives under
rule 23, i.e., whether the putative class
representatives are “willing” and “able” to
“take an active role in and control the litigation
and to protect the interests of absentees.”6
This court has determined that
[t]he adequacy requirement mandates an
inquiry into [1] the zeal and competence
of the representative[s’] counsel and . . .
[2] the willingness and ability of the rep-
resentative[s] to take an active role in
and control the litigation and to protect
the interests of absentees[.]
See Horton v. Goose Creek Indep. Sch. Dist.,
690 F.2d 470, 484 (5th Cir. 1982) (citations
omitted).7 The adequacy inquiry also “serves
to uncover conflicts of interest between the
named plaintiffs and the class they seek to
represent.” See Amchem Prods., Inc. v.
Windsor, 521 U.S. 591, 625 (1997).
Furthermore, because absent class members
are conclusively bound by the judgment in any
class action brought on their behalf, the court
must be especially vigilant to ensure that the
due process rights of all class members are
safeguarded through adequate representation
5 Compaq does not challenge the rulings that the
Investors have satisfied the numerosity, com-
monality, and typicality requirements of rule 23(a),
or that certification is appropriate under rule
23(b)(3), which provides that an action may be
maintained as a class action if “the court finds that
the questions of law or fact common to the
members of the class predominate over any ques-
tions affecting only individual members, and that a
class action is superior to other available methods
for the fair and efficient adjudication of the
controversy.”
6 The district court’s observation that Compaq’s
decision not to challenge the adequacy of class
counsel “tends to undermine [Compaq’s] argument
that the class will be inadequately represented”
evinces a misunderstanding of the nature of the
adequacy inquiry and of Compaq’s contention that
class representatives, not class counsel, must direct
the litigation.
7 The task of defining the precise contours of
rule 23(a)’s adequacy requirement was largely left
to the lower courts after Hansberry v. Lee, 311
U.S. 32 (1940). See generally 7A CHARLES A.
WRIGHT, ARTHUR R. MILLER & MARY KAY KANE,
FEDERAL PRACTICE AND PROCEDURE § 1765, at
269 (2d ed. 1986). Consequently, there is a lack of
uniformity in the various formulations of the
requirements for adequacy.

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at all times.8 Differences between named
plaintiffs and class members render the named
plaintiffs inadequate representatives only
where those differences create conflicts
between the named plaintiffs’ and the class
members’ interests.9
Although we do not know whether the
named plaintiffs could meet the adequacy stan-
dard,10 we do know that the district court
8 See Phillips Petroleum Co. v. Shutts, 472
U.S. 797, 812 (1985) (“[T]he Due Process Clause
of course requires that the named plaintiff at all
times adequately represent the interests of the ab-
sent class members.”); see also Hervey v. City of
Little Rock, 787 F.2d 1223, 1227 (8th Cir. 1986)
(noting that even if the parties stipulate to
certification, the court still must conduct a
thorough rule 23(a) inquiry: “While class
stipulations by the parties may be helpful, they are
not complete substitutes for ‘rigorous analysis.’
The purpose of this analysis is to protect unknown
or unnamed potential class members, and by
definition those people do not and cannot
participate in any stipulations concocted by the
named parties.”).
9 See Jenkins v. Raymark Indus., Inc., 782 F.2d
468, 472 (5th Cir. 1986) (considering, in
evaluating the requirement of adequate
representation, whether named plaintiffs have “an
insufficient stake in the outcome or interests
antagonistic to the unnamed members”; see also
Mullen, 186 F.3d at 626 (noting that although the
differences described by defendant might create
variances in the ways that the named plaintiffs and
class members prove causation and damages, this
did not affect the alignment of their interests).
10 Compaq argues that the four named class
representatives fall far short of meeting the stan-
dard. Set forth below are excerpts from Compaq’s
brief in this regard:
(continued...)
10(...continued)
. . . [T]he [deposition] testimony of
these representatives shows indifference to
and ignorance of key facts, a willingness to
speculate without foundation, decisions
based on misinformation and blind reference
on counsel. The proposed representatives
could not give any basis for their conclusory
“channel stuffing” allegations and could not
explain, except through speculation, why
they accused Compaq’s Chief Executive
Officer and twelve other individuals of
fraud. They could not articulate one fact to
suggest that excess channel inventory was
due to fraud rather than to an unforeseen
change in market conditions or a mistake in
business judgment, and instead relied on
what they themselves admitted was pure
supposition and hindsight reasoning.
. . .
Their shortcomings include taking po-
sitions in conflict with the Complaint, bas-
ing allegations on misinformation, and spec-
ulating without foundation about accu-
sations of fraud against individuals.
. . .
[N]one could articulate a distinction
between legitimate and fraudulent sales to
the channel or identify a single specific fact
supporting their allegation that excess chan-
nel inventory in this case was the result of
channel “stuffing” rather than of a non-
fraudulent cause, such as demand or
competition.
When asked to give a basis for their al-
legations regarding what supposedly
motivated the Company’s chief executive,
Eckhard Pfeiffer, to commit fraud, the rep-
resentatives were not able to identify any
(continued...)

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erred in two respects. First, it improperly
shifted the burden of proof to the defendants
by adopting a presumption that the class rep-
resentatives and their counsel are adequate in
the absence of specific proof to the contrary.
Second, it applied an impermissibly lax
standard for adequacy that ignores the
PSLRA’s mandate that class representatives,
and not lawyers, must direct and control the
litigation. The Investors’ arguments to salvage
both rulings are unpersuasive.11
A.
The district court unquestionably adopted
an incorrect legal standard by stating that
“[t]he adequacy of the putative representatives
and of plaintiffs’ counsel is presumed in the
absence of specific proof to the contrary.”
This is error; the party seeking certification
bears the burden of establishing that all
requirements of rule 23(a) have been satisfied.
See Castano, 84 F.3d at 740. Falcon v.
General Telephone Co., 626 F.2d 369 (5th
Cir. 1980), vacated on other grounds, 450
U.S. 1036 (1981), cited by the district court, is
not to the contrary.
In Falcon, id. at 376 n.8, this court merely
approved the practice of taking judicial notice
of the competence of class counsel.12 Taking
judicial notice of the fact that counsel is
competent, however, is not the same as
holding that class representatives therefore are
presumed to be adequate under rule 23(a)(4).
Indeed, the district court’s presumption inverts
the well-established rule that the party seeking
certification bears the burden of establishing all
elements of rule 23(a). Even more unsettling
is that the district court’s presumption ignores
the constitutional dimensions of the adequacy
requirement, which implicates the due process
rights of all members who will be bound by the
judgment.
The Investors’ words belie the error. They
characterize the district court’s action not as
shifting the burden of proof, but rather as a full
consideration of “defendants’ objections to the
certified representatives’ adequacy as well as
evidence to the contrary presented by
plaintiffs.” The argument’s structure confesses
10(...continued)
supporting facts, and simply resorted
to speculation, irrelevant personal
experiences, and undifferentiated
citation to the Complaint.
One representative not only had no
knowledge regarding why Pfeiffer allegedly
committed fraud, but disavowed the al-
legations in the Complaint that Pfeiffer
committed fraud in order to receive higher
bonus compensation.
. . . Such conflicts between what the
proposed class representatives believe and
what the Complaint and class counsel allege
indicate that the lawyers . . ., and not the
plaintiffs themselves, are driving this litiga-
tion.
11 First, they claim that the court merely
concluded that “the skill and experience of
plaintiffs’ counsel is more important” in assessing
adequacy than are “the personal qualifications of
the named parties.” Second, they aver that the
court properly rejected Compaq’s argument
regarding the PSLRA’s effect on the stringency of
rule 23(a)’s adequacy requirements.
12 See also 7A CHARLES A. WRIGHT, ARTHUR
R. MILLER & MARY KAY KANE, FEDERAL
PRACTICE AND PROCEDURE § 1765, at 277-78 (2d
ed. 1986) (“Moreover, a few courts have indicated
that if the opposing party fails to challenge the
ability of representatives’ counsel to conduct the
action, his competence will be assumed.”).

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the error: Adequacy is for the plaintiffs to
demonstrate; it is not up to defendants to dis-
prove the presumption of adequacy.
The Investors’ offer of supporting
precedent also fails. Neither case they cite
supports their argument that once they
establish (1) the lack of conflict between the
representatives and the absent class members
and (2) the adequacy of class counsel,
adequacy of class representation is
“presumed.” In Kalodner v. Michaels Stores,
Inc., 172 F.R.D. 200, 211 (N.D. Tex. 1997),
for example, the court merely presumed the
adequacy of class counsel. Likewise, in
Longden v. Sunderman,13 even though the
court concluded that “the qualifications and
experience of class counsel is of greater
consequence than the knowledge of class rep-
resentatives,” there is no mention of any “pre-
sumption” whereby evidence of a lack of con-
flict together with evidence of counsel’s com-
petency, without more, conclusively
establishes the adequacy of class
representation.
In sum, the district court’s “presumption”
of adequate class representation “in the
absence of any specific proof to the contrary”
is reversible error on two grounds. First, it in-
verts the requirement that the party seeking
certification bears the burden of proving all
elements of rule 23(a). Second, it effectively
abdicatesSSto a self-interested partySSthe
court’s duty to ensure that the due process
rights of the absent class members are
safeguarded.
B.
Compaq also argues that the district court
applied an impermissibly lax adequacy stan-
dard. We address this issue to guide the
district court on remand.
Compaq’s basic contention is that when
assaying whether the named plaintiffs are ade-
quate, a court must account for PSLRA’s sub-
stantive goals. In responding to this assertion,
we analyze the PSLRA and our precedent. Al-
though the extent of the PSLRA’s impact on
the rule 23 inquiry is a matter of first im-
pression in this circuit, we are guided by anal-
ogous precedent involving other statutes. Ad-
ditionally, we consider the particular statutory
change effected by the PSLRA.
As an initial matter, we articulate the
adequacy standard outside of any specific
statutory context. The district court cited
Surowitz v. Hilton Hotels Corp., 383 U.S. 363
(1966), for the notion that “[a]dequacy is a
low threshold.” This is a misapplication of
Surowitz.
Although “often cited inaccurately to sup-
port arguments that plaintiffs with little
understanding of the facts or theories of their
claims and little incentive to monitor the lit-
igation can nonetheless be adequate class rep-
resentatives,”14 Surowitz did not address the
13 123 F.R.D. 547, 557-58 (N.D. Tex. 1988)
(“In order to satisfy the requirements of rule
23(a)(4) that the representative parties fairly and
adequately protect the interests of the class, the
interests of the class representative must not be
antagonistic to those of the remaining class
members, and the representative parties, through
their attorneys, must be prepared to prosecute the
action vigorously.”).
14 See Elliot J. Weiss and John S. Beckerman,
Let the Money Do the Monitoring: How
Institutional Investors Can Reduce Agency Costs
in Securities Class Actions, 104 YALE L.J. 2053,
(continued...)

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adequacy requirement, but concerned only the
verification of a complaint. Just as Surowitz
did not hold, this circuit has never read Suro-
witz so broadly as to support the proposition
that a class representative who does not
understand any of the legal relationships or
comprehend any of the business transactions
described in the complaint nonetheless may be
“adequate” for purposes of class certification.
To the contrary, we have described “[t]he
adequacy requirement [as one that] mandates
an inquiry into . . . the willingness and ability
of the representatives to take an active role in
and control the litigation and to protect the
interests of absentees.” Horton, 690 F.2d at
484. Likewise, even in Gonzales v. Cassidy,
474 F.2d 67 (5th Cir. 1973), which interpreted
rule 23(a)’s adequacy requirement somewhat
more loosely, we insisted that “it must appear
that the representative[s] will vigorously pro-
secut e the interests of the class through
qualified counsel.” Id. at 72 (5th Cir. 1973).
Both understandingsSSeven accepting the
variance between themSSrequire the class
representatives to possess a sufficient level of
knowledge and understanding to be capable of
“controlling” or “prosecuting” the litigation.15
Once the generic standard is understood,
the indagation becomes whether, and to what
extent, the statute affects the standard. “[T]he
class determination generally involves
considerations that are enmeshed in the factual
and legal issues comprising the plaintiff’s cause
of action.” See Castano, 84 F.3d at 744
(citing Coopers & Lybrand v. Livesay, 437
U.S. 463, 468 (1978) (internal quotation
marks and citation omitted)).16 Likewise, we
have called for rule 23 to be interpreted to
accommodate the substantive policies of the
governing statute.17
Indeed, this court’s pre-Reform Act
precedent outside the context of securities
fraud litigation already has recognized the
importance, when making the adequacy
determination, of assessing “the willingness
and ability of the representatives to take an
active role in and control the litigation.” See
Horton, 690 F.2d at 484. Although, certainly,
class representatives need not be legal scholars
and are entitled to rely on counsel, plaintiffs do
14(...continued)
2127 n.254 (1995).
15 The Investors’ proffered cases undermine
their claim. Even those opinions that privilege the
counsel’s qualifications over the class
representatives’ knowledge admit that the
representatives’ level of knowledge remains a
relevant factor. See, e.g., Longden, 123 F.R.D. at
558 (“In analyzing the ‘vigorous prosecution’
element of the adequacy requirement, the Court
concludes that the qualifications and experience of
class counsel is of greater consequence than the
knowledge of class representatives.”) (emphasis
15(...continued)
added).
16 Coopers & Lybrand involved securities
fraud, albeit in the context of pre-Reform Act law.
Whether the case was pre- or post-Reform Act
does not affect the principle at issue here: When
making a class certification determination, courts
should consider the applicable legal landscape. It
would be somewhat inconsistent for us to rely on
Coopers & Lybrand when creating precedent such
as Castano and then not applySSor at least not
inquire as to the applicability ofSSCoopers & Ly-
brand in a securities fraud case such as this one.
17 See Redditt v. Miss. Extended Care Ctrs.,
718 F.2d 1381, 1388 (5th Cir. 1983) (stating that
courts must interpret rule 23 to accommodate the
substantive policies of title VII) (citations omitted).

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need to know more than that they were
“involved in a bad business deal.” Kelley v.
Mid-America Stables Racing, Inc., 139 F.R.D.
405, 410 (W.D. Okla. 1990).18 Unoccupied
space exists between these positions for the
purpose of preserving meaningful
consideration of the class representatives’
knowledge about, or control of, the litigation.
Any lingering uncertainty, with respect to
the adequacy standard in securities fraud class
actions, has been conclusively resolved by the
PSLRA’s requirement that securities class ac-
tions be managed by active, able class
representatives who are informed and can
demonstrate they are directing the litigation.
In this way, the PSLRA raises the standard
adequacy threshold.
The Investors, in response, rely on
legislative history: “The provisions of the bill
relating to the appointment of a lead plaintiff
are not intended to affect current law with
regard to challenges to the adequacy of the
class representative or typicality of the claims
among the class.” H.R. Conf. Rep. No. 104-
67, at 34-35 (1995). Assuming, arguendo,
that we should even look to such legislative
history here, it appears that because
defendants are not entitled to challenge the
appointment of lead plaintiffs, this reference
merely reflects recognition by Congress that its
overlay of the lead plaintiff provisions in class
actions should not be interpreted to limit
defendants’ ability to challenge the adequacy
or typicality of the proposed class
representatives in the context of class
certification. The district court erred in failing
to consider the adequacy requirement through
the lens of Congress’s activity in this area.
III.
In summary, it follows that in complex class
action securities cases governed by the
PSLRA, the adequacy standard must reflect
the governing principles of the Act and,
particularly, Congress’s emphatic command
that competent plaintiffs, rather than lawyers,
direct such cases. Accordingly, to the extent
that the district court’s adequacy analysis
failed to assess the representatives’ own
qualifications “to take an active role in and
control the litigation,” the court departed from
the correct legal standard.
We reverse for the above error and for the
improper shift, from plaintiff to defendant, of
the burden of proof regarding an element of
rule 23. Precedent and due process concerns
require that courts protect potential class
members by ensuring that the named plaintiffs
demonstrate their adequacy. Class action law-
suits are intended to serve as a vehicle for cap-
able, committed advocates to pursue the goals
of the class members through counsel, not for
capable, committed counsel to pursue their
own goals through those class members.
VACATED and REMANDED.
18 Kelley provides a useful example for this
circuit. There the court noted, and we agree, that
it is not enough that plaintiff’s counsel are
competent if the plaintiffs themselves almost totally
lack familiarity with the facts of the case. See Kel-
ley, 139 F.R.D. at 409-11. The Kelley court was
concerned not only that the plaintiffs lacked
familiarity with the facts, but also that counsel
apparently was the source of plaintiffs’
information. We see these as two separate re-
quirements: Plaintiffs should understand the
actions in which they are involved, and that
understanding should not be limited to derivative
knowledge acquired solely from counsel.

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