What happens when a court decides the lawyers are not properly representing the class action?

This case acquaints us with an aspect of class action litigation that we don't hear too much about. At least I don't hear about it much. For the court to certify a class action, it has to determine that the lawyers handling the case are capable of properly representing the class. What happens if the court decides that the lawyers are not capable?

The case is Jin v. Shanghai Original, Inc., issued on March 9. This is a wage and hour case alleging the restaurant did not properly pay its employees minimum wage and overtime. Wage and hour claims are rampant in New York City. The district court certified a class action and appointed a law firm to represent the class based on its experience in handling cases like this. But, the Court of Appeals (Kearse, Livingston and Wesley), that representation "faltered" because counsel, upon petitioning the court to reopen discovery to prove that management was impermissibly persuading employees to opt out of the class, did not complete the necessary depositions to prove that. As the Court writes:

The magistrate judge reopened discovery for a limited amount of time to allow  class  counsel  to  conduct  depositions  of  three  restaurant  managers  and twenty-five  class  members  who  opted  out  to  investigate  the  Owners’  alleged interference.  During a status conference on the last day of the discovery period–– which  class  counsel  tried  twice  to  delay––class  counsel  revealed  they  had conducted only a few depositions of the managers, none of the employees, and stopped conducting the remaining planned depositions more than a month before the deadline without notifying the court.

Then, when the court scheduled the case for trial, since there were no records to prove the case as management had lost the required record-keeping, 

class counsel’s revised witness list did not reflect an understanding that witness testimony would be essential for proving the class’s claims. Their first revised witness list included thirty-four witnesses and gave inadequate details on each witness’s anticipated testimony.  The second revised list revealed that class counsel planned to call just four witnesses, only two of whom were class members. The two non-class members were not employed at  Joe’s  Shanghai  in  Flushing, and  the anticipated  testimony  of  one  seemed  to undermine the class claim because he was paid an hourly, rather than flat, wage. Class  counsel  also  submitted  a  final  class list  consisting  of  thirty-eight  class members.

At this point, the district court decertified the class on the basis that  “by calling only two   relevant   witnesses”   class   counsel   was   not   “fairly   and  adequately represent[ing] the interests of the class,” in violation of Rule 23(g). The two plaintiffs did proceed to a bench trial without the class action and won their cases. But no class action.

The Court of Appeals resolves two issues. First, it holds that the sole plaintiff who took the appeal in challenging the dissolution of the class may pursue that appeal even though he got the relief he wanted in the bench trial. Jin retains a personal stake in the appeal. The Court reasons:

Even accepting that Jin lacks a financial interest in the class certification issue,12  neither we nor the Supreme Court  have  required  that  to  satisfy  personal  stake  in  the  context  of  a named plaintiff appealing the denial of class certification following a favorable judgment  on  the  merits  at  trial. Indeed,  as  noted  above,  the  [Supreme] Court  [has] identified several types of relevant interests and determined “the narrow question presented  requires  consideration  only  of  the  private  interest  of  the  named plaintiffs.” The Court nowhere required that a named plaintiff’s personal stake be financial.

Moreover, the state Labor Law allows "private attorneys' general," or private plaintiffs, to bring these claims. "The NYLL is an excellent example of a law for which class actions help enforce important public policies, as its goal is to protect workers from abusive employment practices and ensure compensation in accordance with hours worked. The class Jin  seeks  to  represent  serves  this  goal: given  the  small  size  of  many  of  the individual claims, those class members lack incentive to pursue the alleged NYLL violations and would not obtain relief without class certification."

The Court next finds the district court did not abuse its discretion in decertifying the class based on counsel's inadequate representation. "The  district court  need  only  find  that  a  previously  satisfied  requirement  of  Rule  23  is  now lacking. . . . The district court acted within its discretion in decertifying the class on the ground  that  class counsel  was  no  longer  adequately  representing  the  class. Competent representation by class counsel is crucial to the prosecution of a class action." The Court goes on to explain:

The record is replete with counsel’s   shortcomings   before   the   class   was   decertified:   class   counsel   (1) attempted numerous times to delay trial without any meritorious basis; (2) had the court reopen discovery to conduct twenty-eight depositions related to the Owners’ alleged misconduct but  conducted only three and failed to inform the court until over a month after they abandoned depositions; (3) repeatedly failed to submit a witness list that complied with Judge Ross’s instructions; and (4) in its final revised list,  indicated  they  would  only  call  two  class  members  as  witnesses  despite indications in the JPTO of the significance of class-member testimony.  Counsel’s representation   of   the   class   fell   woefully   short   of   the   skilled   and   zealous representation    expected    of    class    counsel    under    Rule  23(g),  justifying decertification.