Monthly Archives: February 2015

“Winners” in a Ponzi Scheme Lose Class Certification Fight

View David Wright's Complete Bio at RBH.comAlthough Rule 23(a) provides that members of a class may “sue or be sued,” a defendant class is quite the rarity. But the court-appointed receiver of Rex Venture Group, LLC d/b/a www.ZeekRewards.com was successful in persuading Judge Mullen to certify a defendant class comprised of “Net Winners” in a Ponzi scheme in which over 700,000 participants lost over $700 million. See Bell v. Disner, No. 3:14-cv-91 (W.D.N.C. Feb. 10, 2015). Over $238 million in net winnings, according to the receiver, were obtained by 9,400 individuals from the net losers’ money. Judge Mullen found that a class action was a particularly suitable vehicle to recover unjust gains received in a fraudulent transfer setting, noting that “the efficiency of one action in which all parties can argue their case and assert their rights will benefit both the Receiver and small winners.” The Court was “firmly convinced a class action is the only means to reasonably and efficiently resolve the Receiver’s claims against 9,400 Net Winners.” The Court cited two bankruptcy decision from outside the Fourth Circuit which concluded that Rule 23(a) requires only that a “single issue” be common to the class, and concluded that “any potential dissimilarities among the members of the proposed class do not impair the ability to reach a common resolution to the core issues of law and fact in this case.”

Certification of a defendant class raises obvious due process issues: if the common question is decided against an absent class member, his or her personal pocket book becomes at risk, and the affected class member must ride the coattails of the named representatives to protect against financial loss. Judge Mullen indicated he was “mindful of due process concerns,” but nevertheless chose to proceed under Rule 23. Most class actions notices are thrown away by class members – here’s hoping that the 9,400 “net winners” will pay a bit more attention to their mail.

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Recent Filings – January Digest

View Susan Huber's Complete Bio at RBH.com Not every class action court filing in North and South Carolina becomes a full-length post on our blog. Here is a recap of January’s filings:

Stinnett v. Beachbody Fitness & Bootcamps, LLC, No. 4:15-cv-00432 (D.S.C. Jan. 29, 2015) (collective action brought by personal trainer alleging minimum wage and overtime violations of the Fair Labor Standards Act and the South Carolina Payment of Wages Act).

Dlyedy Inc. v. Church & Dwight Co., No. 15-cv-00131 (Wake Cnty. N.C. Super. Ct. Jan. 28, 2015) (pro se class action alleging myriad claims related to Arm and Hammer baking soda being used as a “crack cocaine enabling device”).

Patterson v. JM Adjustment Servs., LLC, No. 1:15-cv-00094 (M.D.N.C. Jan. 27, 2015) (alleging violations of the federal Fair Debt Collection Practices Act on behalf of a nationwide class of consumers).

Physicians Healthsource, Inc. v. Salix Pharmaceuticals, Inc., No. 5:15-cv-00036 (E.D.N.C. Jan. 22, 2015) (nationwide class action alleging violations of the Junk Fax Prevention Act for sending unsolicited advertisements without an opt-out notice). Plaintiff also filed a motion for class certification to prevent a “pick-off attempt” to moot the class action by settling with the individual plaintiff.

Carlson v. S.C. State Plastering LLC, No. 9:15-cv-00292 (D.S.C. Jan. 21, 2015) (removal under the Class Action Fairness Act of action alleging home construction defects in stucco homes in the Sun City development in Bluffton, South Carolina).

Jack H. Winslow Farms, Inc. et al. v. Syngenta AG, et al., No. 4:15-cv-00016 (E.D.N.C. Jan. 21, 2015) (Dever, J.) (82-page complaint brought on behalf of nationwide corn producers alleging false statements concerning China export market).

Jenkins v. The Moses H. Cone Mem’l Health Servs. Corp., No. 5:15-cv-00034 (E.D.N.C. Jan. 21, 2015) (removal of action alleging breach of contract and related claims for hospital’s billing practices brought on behalf of similarly situated patients). The lawsuit was originally filed in Wake County Superior Court on December 1, 2014, and mirrors Southern v. WakeMed (summarized below).

Southern v. WakeMed, No. 4:15-cv-00015 (E.D.N.C. Jan. 20, 2015) (removal of action alleging breach of contract and related claims for hospital’s billing practices brought on behalf of similarly situated patients). The lawsuit was originally filed in Wake County Superior Court on October 16, 2013 and recently amended to add what Defendant contends are federal claims arising under the Employee Retirement Income Security Act. On January 26, 2015, the case number changed to 5:15-cv-00035.

Kenzik v. Kiley & Kiley, L.L.C., No. 2:15-cv-00201 (D.S.C. Jan. 15, 2015) (alleging violations of the Telephone Consumer Protection Act for unsolicited robocalls to residential and cellular phone numbers, including numbers registered on the “do not call” list, on behalf of a purported nationwide class). Plaintiff also filed a “placeholder” motion for class certification “to prevent any attempt by Defendant to avoid class certification by ‘picking off’ Plaintiff’s individual claims.”

Michelle H. v. Haley, No. 2:15-cv-00134 (D.S.C. Jan. 12, 2015) (civil rights class action for injunctive relief related to alleged deficiencies in the South Carolina Department of Social Services’ treatment of foster children).

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