Moody v. Sears, Roebuck & Co.

Moody v. Sears, Roebuck & Co., 2008 NCBC 14.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF NEW HANOVER 02 CVS 4892

WILLIAM MOODY, JR., on behalf )
himself and others similarly situated, )
)
)
Plaintiff, ) ORDER
)
v. )
)
SEARS, ROEBUCK AND CO., )
)
Defendant. )

{1} This matter is before the Court on remand from the North Carolina Court of Appeals.
Moody v. Sears Roebuck & Co., No. COA07-1089, 2008 N.C. App. LEXIS 1324 (N.C. Ct. App. July
15, 2008). The Court of Appeals has ruled that this Court should have afforded full faith and credit
to the settlement approved by the Honorable Julia M. Nowicki of the Circuit Court of Cook County,
Illinois, in Wrobel v. Sears Roebuck & Co., No. 02 CH 23058 (Ill. Cir. Ct. Dec. 24, 2002), and
instructed the Court to dismiss the class action allegations with prejudice. 1 In so doing, the Court of
Appeals shared the trial court’s serious concerns regarding the final accounting, which showed that
the class members in North Carolina received $66.00 in cash and coupons and the nationwide class
members received $2,402.00 in cash and coupons, while Plaintiff’s counsel received $1,100,000.00
in cash and coupons. Moody, 2008 N.C. App. LEXIS 1324 at *11, *41. Based on that concern, the
appellate court provided direct instructions to the trial courts about their obligations to oversee class
actions. The Court of Appeals said:
We . . . hold that the requirements of our own Rule 23(c) do not apply to pre-
certification class-action complaints. Therefore, we hold that the trial court erred in
concluding that Plaintiff Moody was required to obtain judicial approval under Rule
23(c) before obtaining a voluntary dismissal of his class-action complaint. . . .
....

1
This Court has previously dismissed Mr. Moody’s individual claim, which the Court of Appeals found deprived him
of standing on appeal.
Without some level of pre-certification court supervision, there is an unacceptable
risk that parties may abuse the class-action mechanism in myriad ways. . . .
....
We therefore hold that when a plaintiff seeks voluntary dismissal of a pre-
certification class-action complaint, the trial court should engage in a limited inquiry
to determine (a) whether the parties have abused the class-action mechanism for
personal gain, and (b) whether dismissal will prejudice absent putative class
members. If the trial court finds that neither of these concerns are present, the
plaintiff is entitled to a voluntary dismissal. However, if the trial court finds that one
or both of these concerns are present, it retains discretion to address the issues . . . .
To the extent the trial court's post-16 December 2004 orders encompassed this type
of limited inquiry, the trial court did not err by issuing such orders.

Moody, 2008 N.C. App. LEXIS 1324, at *22, *26, *28. (emphasis added.)

{2} Applying the holdings set out above in future cases is not a problem for Special Superior
Court Judges for Complex Business Cases. 2 All pleadings are required to be filed with the judge
assigned the case. The Business Court judge therefore will have notice of the filing of a voluntary
dismissal. The Court takes this opportunity to inform the Bar of the procedures that counsel must
follow in pre-certification class actions assigned to Special Superior Court Judges for Complex
Business Cases when a plaintiff who has assumed a fiduciary duty by filing a class action
subsequently files a voluntary dismissal. These measures are taken in order for the Court to exercise
the level of pre-certification court supervision directed and approved by the Court of Appeals.
{3} Counsel shall be required to file with the Court a statement of (1) the reason for
dismissal, (2) the personal gain received by the plaintiffs in any settlement, (3) a statement of any
other material terms of the settlement, specifically including any terms which have the potential to
impact class members, (4) a statement of any counsel fees paid to plaintiff’s counsel by defendants,
and (5) a statement of any agreement by plaintiff(s) restricting their ability to file other litigation
against any defendant. Plaintiff(s) counsel shall also file a statement either detailing any potential
prejudice to putative class members or representing to the Court that no prejudice exists. Courts will
be particularly concerned about issues related to tolling of the statute of limitations. The Court notes
the Court of Appeals’ approval of its authority to hold a certification hearing, certify the class if

2
This Court is in no position to determine how other trial courts will exercise their supervisory obligations if a plaintiff
simply files a voluntary dismissal with prejudice with the clerk’s office. Must the Clerk do something? Is the Senior
Resident Judge required to review dismissals of pre-certification class actions? Is counsel required to file a motion?
appropriate, and order that notice be given to the class members if concerns are present. See Moody,
2008 N.C. App. LEXIS 1324, at *28 n.7.
{4} In the instance where a plaintiff files a voluntary dismissal based upon approval of a
nationwide class action settlement in a foreign jurisdiction which encompasses persons who would
have been class members in a North Carolina action, counsel shall file with the Court a copy of the
order approving settlement and sufficient information concerning the notice provisions so that the
Court can ascertain if jurisdictional and due process issues have been addressed by the foreign court
and whether North Carolina citizens have been represented in the proceeding. This will permit the
Court to raise any concerns with the foreign court. 3 Once those concerns have been addressed, the
foreign court’s order will be entitled to full faith and credit whether or not this Court would have
granted approval of the settlement. North Carolina counsel will be required to file a final accounting
as described in paragraph 6 below.
{5} In providing instruction to trial judges on their obligations to supervise class actions, the
Court of Appeals recognized the need for judicial oversight of settlements. One comprehensive
study of class actions explained the benefits of judicial oversight as follows:
If judges already have the power to regulate damage class actions but not
all of them use it fully, what stands in the way of stricter regulations? We see
three obstacles: a discourse about judging that emphasizes calendar-clearing
above all other values, a belief that court efficiency is measured in terms of
dollars spent rather than dollars spent well, and a failure to systematically expose
what occurs in damage class actions to public light.
To promote stricter regulation of damage class actions, we need to change
the discourse about the role of judges in collective litigation. Judges need to be
educated that damage class actions are not just about problem solving, that the
rights of plaintiffs and defendants are at stake, that responsibility for case
outcomes lies not just with class counsel and defendant but with the judge as well,
and that what is deemed acceptable in one case sends important signals about
what will be deemed acceptable in another.
....
As with many other public controversies, the debate over damage class
actions has created a lot of heat without shedding much light on the range of
practices and outcomes in these lawsuits. Shining more light on damage class
action outcomes would enhance judges’ incentives to regulate class actions.
Comprehensive reporting of class action litigation would provide a rich resource
for policymakers concerned about class action reform as well as an unbiased
information source for print and broadcast reporters.
To increase public information about class action outcomes:

3
The Court of Appeals raised no concern over this Court’s communication of its concerns to Judge Nowicki.
ƒ Judges should require public reporting of the number of class
members who claimed and received compensation, the total funds
disbursed to class members, the names of other beneficiaries and
amounts disbursed to them, and the amounts paid to class counsel
in fees and expenses.
ƒ Courts and legislatures should find ways of facilitating broad
public access to such data, for example, by making electronically
readable case files through the internet.

Deborah R. Hensler et al., RAND Inst. for Civil Justice, Class Action Dilemmas: Pursuing
Public Goals for Private Gain, Executive Summary 35, 37 (2000).
{6} Based upon the ruling of the Court of Appeals on the Petition for Writ of Mandamus in
this case, this Court concludes that it also is entitled to receive a copy of the final accounting of the
distributions to the class in every class action case pending before the Court. It has been the practice
of this Court to require class representatives to file and publish a copy of the final accounting
detailing the amount of money (or coupons) actually received by the class, the amount of
administrative fees, and the amount of attorney fees received. Only by seeing those numbers can
this Court perform the judicial oversight mandated by the Court of Appeals in its decision. It is the
only way for the public to know what happened.
{7} The Court concludes that lawyers who file actions purporting to be class actions in North
Carolina and then settle the claims of North Carolina citizens (and receive compensation for their
services) in connection with a nationwide class action settlement in a foreign jurisdiction should be
treated the same as counsel who complete their class action litigation in North Carolina. The Court
will continue its prior practice requiring filing of settlement results in those cases in order to fulfill
the supervision mandated by the Court of Appeals’ opinion in this case and to ensure public
knowledge of the results of class action settlements that affect North Carolina residents. The results
will be published on the Court’s website.
{8} In adopting these procedures the Business Court seeks to promote greater transparency
that will fill the “informational black hole” concerning final distributions and make administration of
class actions more efficient and effective and thus more beneficial to class members. Further studies
at the RAND Institute have confirmed the need for this information:
The lack of transparency concerning class action distribution rates is
troubling because so many fundamental issues turn on what is contained in the
missing data: How can class members and government officials make informed
responses to proposed notice and claiming programs without some sense of the
likely distributional outcome? On what basis are judges approving settlements
and awarding fees without knowing the most likely results of their orders? Who
ultimately benefits from class cases? Can different forms of notice and different
types of distributional programs improve claiming rates? If so, which ones? If
compensation programs are unlikely to change, should compensation remain a
central feature of class actions or should the deterrent aspects be emphasized
instead? If so, how? Despite the importance of these questions, it is unclear
whether the data needed to answer them are available to policymakers and the
public.

Pace, Nicholas M. & Rubenstein, William B., How Transparent are Class Action Outcomes?:
Empirical Research on the Availability of Class Action Claims Data 2 (RAND Working Paper
Series WR- 599-ICJ, 2008), available at SSRN: http://ssrn.com/abstract=1206315.
{9} This Court would add to that list of benefits from transparency, the benefit of judges being
able to assess the past performance, abilities and commitment of those lawyers who seek to be class
counsel in other cases. A history of final results in other cases would also alert judges to scrutinize
settlements proposed by defendants who have settled their class action in ways that resulted in no
benefits to class members. This Court can think of no reason why the final results should not be
made known to the Court and the citizens affected.
{10} The Special Superior Court Judges for Complex Business Cases will follow the guidelines
and procedures set forth in paragraphs 3, 4, and 6 above to provide the supervision and transparency
encouraged by the Court of Appeals with respect to class action litigation.
{11} The class action allegations in this action are dismissed with prejudice.

SO ORDERED, this the 6th day of August 2008.

The Honorable Ben F. Tennille
Chief Special Superior Court Judge
for Complex Business Cases