You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Turner v. Alaska Communications Systems Long Distance (10/10/2003) sp-5742
Turner v. Alaska Communications Systems Long Distance (10/10/2003) sp-5742
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
DEWANA G. TURNER, BONITA )
H. HIXSON, and YOLANDA P. ) Supreme Court No. S-10692
MONROE, on behalf of themselves )
and all others similarly situated, ) Superior Court No.
) 3AN-01-07208 CI
Petitioners, )
) O P I N I O N
v. )
) [No. 5742 - October 10, 2003]
ALASKA COMMUNICATIONS )
SYSTEMS LONG DISTANCE, )
INC., and ALASKA )
COMMUNICATIONS SYSTEMS )
GROUP, INC., )
)
Respondents. )
________________________________)
Petition for Review from the Superior Court
of the State of Alaska, Third Judicial
District, Anchorage, William F. Morse, Judge.
Appearances: Peter J. Maassen, Ingaldson
Maassen, P.C., Anchorage, and Paul Adelman,
Law Office of Paul Edelman, Anchorage, for
Petitioners. Susan Orlansky, Jeffrey M.
Feldman, and Ruth Botstein, Feldman &
Orlansky, Anchorage, for Respondents.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
FABE, Chief Justice.
I. INTRODUCTION
Petitioners, representing a class suing Alaska
Communications Systems Long Distance, Inc. and Alaska
Communications Systems Group, Inc. for terminating a widely
advertised calling plan, contest a class notification that
suggests that the court may hold absent class members liable for
defendants attorneys fees if the class suffers an adverse
judgment. We conclude that holding these absent class members
liable for attorneys fees upon an adverse judgment will chill
class participation and hamper the efficiencies of class
litigation. We therefore reverse the order of the superior court
approving the disputed language in the class notice.
II. FACTS AND PROCEEDINGS
A. Factual History
In October 2000 Alaska Communications Systems Long
Distance, Inc. and Alaska Communications Systems Group, Inc.
(collectively ACS) offered and marketed a long distance calling
plan that provided unlimited long distance service for a twenty-
dollar monthly fee. After the plan attracted thousands of
customers, ACS canceled the calling plan in May 2001, citing
unexpected high costs, unforseen regulation requirements, and
customer abuses of the plan. ACS did continue to provide a
twenty-dollar monthly long distance plan, but that plan was
limited to 600 monthly minutes.
B. Procedural History
Dewana G. Turner, Bonita H. Hixson, and Yolanda P.
Monroe (collectively Turner), three former subscribers, sued on
behalf of the approximately 30,000 subscribers to the plan,
claiming, among other things, that ACSs unilateral elimination
of the most material element of the long distance contract was a
breach, that ACS violated the Alaska Unfair Trade Practices and
Consumer Protection Act by making misleading statements about the
plan, and that ACS fraudulently concealed material facts,
including the companys inability to maintain the plan for
anything longer than a promotional period. The superior court
certified the class as an Alaska Civil Rule 23(b)(3) class,
requiring notice to potential class members and an opportunity
for class opt-outs. The classs counsel indicated that the award
of damages for each individual class member would range from zero
to a thousand dollars.
The parties disagreed on the wording of the class
notification. Turner wanted the notification to affirmatively
state that absent class members may not be held liable for
attorneys fees: [A]s an absent class member, you cannot be held
liable for any attorneys fees or costs that the Court may award
ACS, if ACS prevails. ACS wanted the class notification to
indicate that class members who did not opt out might be held
liable for attorneys fees in the case of an adverse judgment.
Recognizing that the question whether unsuccessful absent class
members could be exposed to Rule 82 fees raised a difficult
issue, and that the answer was uncertain, the superior court
decided to err on the side of revelation and warn class members
of their possible liability for attorneys fees. It therefore
crafted the following notice:
In Alaska, the losing side in a lawsuit is
generally required to pay a portion of the
winning sides costs and attorneys fees.
Whether this rule applies to all members of a
class action is uncertain. The plaintiff
class appears to have roughly 30,000 members.
If the class loses on the claims it has
brought against ACS, and if the class is
required to pay a portion of ACSs costs and
attorneys fees, then the money owed would be
spread out amongst the entire class. Thus,
if you choose to remain a member of the class
there is a possibility that you will be
required, if the class loses, to pay some of
ACSs costs and attorneys fees incurred in
opposing this litigation.
Believing that the class notice misstated the law,
Turner petitioned this court for review of the legal
permissibility of imposing defendants attorneys fees on absent
class members, and we granted the petition. After oral argument,
we issued an order requiring the superior court to redraft the
notice. This opinion now follows.
III. STANDARD OF REVIEW
The parties disagree about the appropriate standard of
review. ACS argues that we should apply the abuse of discretion
standard, which we have applied for other certification issues
and which federal courts have applied in class notification
cases. But Turner correctly points out that the underlying
question whether a court may assess defendants attorneys fees
against absent class members is one of law.1 Legal issues are
reviewed de novo, and we adopt the rule of law that is most
persuasive in light of precedent, reason, and policy.2
IV. DISCUSSION
It is well established that absent members of a class
generally are not held liable for attorneys fees: An absent
class member is not personally liable for litigation expenses or
attorneys fees except insofar as there is a common fund recovery
for the class.3 The United States Supreme Courts discussion in
Phillips Petroleum Co. v. Shutts explains the purpose of this
rule.4 The Shutts Court addressed whether the state of Kansas
could, without violating the Due Process Clause, assert personal
jurisdiction over members of a class who did not affirmatively
opt into but did not opt out of a class seeking a money judgment.5
In ruling that a Kansas court could assert personal jurisdiction
over absent class members who had limited contacts with the forum
state, the Court reasoned that [u]nlike a defendant in a normal
civil suit, an absent class-action plaintiff is not required to
do anything and an adverse judgment typically [will not] bind an
absent plaintiff for any damages, although a valid adverse
judgment may extinguish any of the plaintiffs claims which were
litigated.6 Therefore, the Due Process Clause need not and does
not afford [absent class plaintiffs] as much protection from
state-court jurisdiction as it does [absent defendants in
nonclass suits].7 While the Shutts decision deals with damages,8
and this case deals with attorneys fees, the relevant point is
that absent class members generally cannot be held liable for
monetary awards.9
Thus, absent class members are not liable for costs,
though they may be otherwise bound by the judgment, whether
favorable or unfavorable.10 An exception applies to this general
rule. When . . . the class action successfully recovers a fund
for the benefit of a class or when nonparties to the suit will
share in those monies, it is long settled, as one treatise
explains, based largely on windfall and unjust enrichment
principles, that the attorneys who created the class recovery are
entitled to be reimbursed from the common fund for their
reasonable litigation expenses, including reasonable attorneys
fees.11
In Municipality of Anchorage v. Gentile, a case in
which class representatives successfully protected the retirement
benefits of retired Anchorage police officers and firefighters,
we addressed the issue of imposing attorneys fees on absent class
members.12 Specifically, we answered the question whether a trial
court could impose attorneys fees on absent class members when a
class common fund consists of benefits protected, rather than
created, by class attorneys.13 In holding that a trial court
could conclude that class members should be required to pay
something for the benefit they have received as a result of the
attorneys efforts,14 we noted that named class parties and their
counsel . . . are not entitled to charge absent class members for
reimbursement of attorneys fees or litigation expenses if the
class suit is unsuccessful.15 However, [w]hen litigation bestows
a benefit upon a class, the propriety of spreading the litigation
costs among those benefited is well established.16
ACS argues that the treatises and court decisions
relied on by Turner address only the question whether it is
permissible to assess the classs own attorneys fees on absent
class members. In contrast, ACS contends, the issue at hand
deals with whether attorneys fees assessed in the case of an
adverse judgment may be imposed on absent class members pursuant
to Rule 82. ACS argues that Rule 82 is unique to Alaska, making
other authority simply inapposite. While the issue of imposing
Rule 82 attorneys fees on absent class members is an issue of
first impression,17 we are not convinced that Rule 82s uniqueness
requires us to impose attorneys fees on absent class members in
the event of an adverse judgment.
In Adams v. Pipeliners Union 798,18 we suggested that
courts may not assess attorneys fees against absent class members
in the event of an adverse judgment. In that case, a union that
supplied workers for the Trans-Alaska Pipeline racially
discriminated against black workers in violation of Alaska law.19
The Alaska State Commission for Human Rights imposed a quota
requiring the Union in filling any job order in Alaska to
allocate 2.2% of its dispatches to blacks.20 The 2.2% figure
matched the percentage of Alaskas black population at the time.21
Adams appealed the commissions remedy, pointing out that the
union had recruited more than half its dispatched Alaska workers
from the South, where the black population represented 38% of the
population.22 In ruling that Adams had standing to appeal the
commissions limited remedy, we stated: [N]o class member stands
to lose anything if Adamss appeal is unsuccessful on the merits.
There still will be a hiring quota imposed on Local 798.
Moreover, Adams will not be able to assess class members with a
portion of his attorneys fees if he loses on the merits.23 ACS
argues that Adams is not controlling because the fee liability
question addressed by the court was about Adamss own attorneys
fees, not prevailing party fees. ACS, however, ignores that in
Adams we partially based our conclusion that standing existed on
the fact that no class member stood to lose anything. If the
imposition of attorneys fees on class members had been allowed,
then class members would have stood to lose something in Adams.
Consequently, Adams does suggest that attorneys fees would not be
imposed on absent class members in the event of an adverse
judgment.
Civil Rule 82(a) provides that the prevailing party in
a civil case shall be awarded attorneys fees calculated under
this rule. Thus, the application of Rule 82 depends on whether
absent class members are parties at all for Rule 82 purposes.
The United States Supreme Court has recently held that
whether unnamed class members are parties depends on the
procedural context in question. In Devlin v. Scardelletti, a
class of retired pension plan recipients attempted to prevent the
trustees of the plan from eliminating a cost of living adjustment
for retired recipients.24 One absent class member, after
objecting to a settlement between the class and the adverse
parties, attempted to appeal the trial courts approval of the
settlement.25 The circuit court held that the absent class member
was not a party and could not appeal the trial courts ruling.26
In overturning the circuit court, the Supreme Court held that
[n]onnamed class members . . . may be parties for some purposes
and not for others.27 The Court continued that [t]he label party
does not indicate an absolute characteristic, but rather a
conclusion about the applicability of various procedural rules
that may differ based on context.28 In determining that the
absent class member was a party in the context of appealing from
an objection to a class settlement offer, the Supreme Court
reasoned that [t]o hold otherwise would deprive nonnamed class
members of the power to preserve their own interests in a
settlement that will ultimately bind them . . . .29 In following
Devlins rationale, we look to the procedural context of Rule 82
attorneys fees and assess the impact of holding that absent class
members are parties liable for non-class attorneys fees.
In this case, each class member only stands to recover
damages ranging from zero to a thousand dollars. Holding absent
class members who stand to gain such small monetary awards liable
for ACSs fees defeats a key role of the class action. In Deposit
Guaranty National Bank v. Roper, the United States Supreme Court
noted that the aggregation of small individual claims is an
important use of the class action device, since without it,
aggrieved persons may be without any effective redress . . . .30
A rule that permits the imposition of attorneys fees on absent
class members who stand to gain such small monetary compensation
will encourage opt-outs and have a chilling effect on this
important use of the class action device. As a result, some
class members with legitimate claims will be left without a
remedy.
Moreover, such a rule might increase litigation.
Although ACS contends that a rational potential plaintiff . . .
would not opt out of the class and file a separate lawsuit,
because such a litigant then would assume the responsibility for
paying the entire Rule 82 award in the second lawsuit, this might
not be the case. ACSs argument ignores the fact that potential
class members who face imposition of attorneys fees in the case
of an adverse verdict may have an incentive to opt out of the
initial litigation in order to observe what happens in that
litigation, maintaining an option to file a second lawsuit if the
first one is successful. This would defeat a key purpose of the
class action the consolidation of like claims into one
litigation.31
ACS contends that public policy favors the imposition
of defendants attorneys fees on absent class members, but ACSs
arguments are unpersuasive. ACS argues that Rule 82 is supposed
to encourage litigants to factor in the costs of litigation when
they decide whether to file lawsuits and whether and when to
settle them, and contends that failing to impose attorneys fees
will improperly affect absent class member behavior. ACS fails
to recognize that absent class members do not file lawsuits32 nor
do they normally settle them.33
As ACS points out, Rule 82, which deviates from the
American rule, is designed to create basic fairness. One who has
been forced to litigate in order to vindicate ones rights should
be reimbursed in part for litigation expenses.34 ACS also notes
that Rule 82 is a two-way fee-shifting statute mandating the
awarding of attorneys fees to the prevailing party whether that
be defendant or plaintiff, whereas many cause of action-specific
fee-shifting statutes are one-way, only providing attorneys fees
for plaintiffs. But our ruling does not eliminate Rule 82
attorneys fees in class actions; it simply limits Rule 82s
possible reach to named parties, meaning that a person who has
been forced to litigate in order to secure his or her rights will
be reimbursed in part for litigation expenses.
Furthermore, we are guided by other courts decisions
regarding whether fee-shifting statutes require the imposition of
attorneys fees on absent class members in the event of an adverse
judgment. In Earley v. Superior Court, for example, a California
court of appeals held that absent class members, at least those
identified on an opt-out basis, cannot be held liable for a
successful defendants attorneys fees or costs.35 The Earley
court, considering an employee class action case for unpaid
overtime wages, reasoned that imposing attorneys fees liability
on absent class members would encourage class members to opt out
and engage in separate litigation.36 The court in Earley
recognized that because the individual claims for unpaid wages
were relatively small, [d]efense fees and costs could easily
dwarf the potential overtime compensation recovery each worker
might obtain.37 Consequently, workers may well forego asserting
their statutory wage and hour rights, thereby emboldening
employers who violate the overtime laws.38 Similarly, in this
case, individual class members have relatively small claims. The
threat of liability for attorneys fees might lead them to
conclude that the game is not worth the candle39 and cause them to
forgo their legal remedies, thereby encouraging allegedly harmful
business practices.
Moreover, while some class members will forgo their
legal remedies, others might opt out and file separate claims.
The Earley court noted that [i]f an individual wage claimant is
going to be held liable for defense fees, it makes much more
economic sense to be liable only for the defense of an individual
action rather than for the defense of a class action.40 Imposing
attorneys fees on absent class members after an adverse judgment
would foster repetitious litigation of essentially identical
claims by individuals whose claims could otherwise be resolved in
one class action.41 And that would undermine the effectiveness of
the group remedy provided by the class action.42
Similarly, in Wright v. Schock, a case involving
certain banks practices in purchasing secured promissory notes,
the Ninth Circuit addressed this issue.43 The trial court in
Wright granted summary judgment and awarded costs to defendants
prior to ruling on class certification.44 The plaintiff argued
that the court should not have granted summary judgment before
ruling on class certification because that prevented the
plaintiff from spreading the judgment of defendants costs across
the class.45 In rejecting this argument, the court recognized
that granting summary judgment before certifying the class would
not harm the plaintiff because [a]bsent class members have no
obligation to pay attorneys fees and litigation costs, except
when they elect to accept the benefit of the litigation.46
V. CONCLUSION
Holding class members who have relatively small claims
and who remain passive throughout litigation liable for nonclass
attorneys fees will increase litigation and hamper the
efficiencies of class litigation. Consequently, we hereby
REVERSE the order of the superior court approving the disputed
language in the class notice and hold that the absent class
members in this case may not be held liable for ACSs attorneys
fees if ACS proves to be successful in this litigation.
_______________________________
1 Earley v. Superior Court, 95 Cal. Rptr. 2d 57, 60 (Cal.
App. 2000) (The extent to which absent class members should be
exposed to personal liability for a successful defendants
attorneys fees and costs is a matter dependent upon questions of
public policy as well as statutory interpretation. These are
questions of law subject to our independent review.).
2 Bennett v. Bennett, 6 P.3d 724, 726 (Alaska 2000).
3 1 Herbert Newberg & Alba Conte, Newberg on Class
Actions 1.03, at 1-12 (3d ed. 1992).
4 472 U.S. 797 (1985); see also Bartek v. State, Dept of
Natural Res., Div. of Forestry, 31 P.3d 100, 102 (Alaska 2001)
(noting that federal decisions are particularly persuasive in
interpreting Alaska Civil Rule 23 because that rule is patterned
after Federal Civil Rule 23).
5 Phillips Petroleum, 472 U.S. at 811.
6 Id. at 810.
7 Id. at 811.
8 In a footnote, the Shutts Court explicitly declined to
make a ruling on the imposition of court costs on absent class
members, but did make this observation: Petitioner places
emphasis on the fact that absent class members might be subject
to discovery, counterclaims, cross-claims, or court costs.
Petitioner cites no cases involving any such imposition upon
plaintiffs, however. We are convinced that such burdens are
rarely imposed upon plaintiff class members, and that the
disposition of these issues is best left to a case which presents
them in a more concrete way. Id. at 810 n.2.
9 Id. at 811-12.
10 3 Herbert Newberg & Alba Conte, Newberg on Class
Actions 16.13, at 16-78 (3d ed. 1992).
11 Id. 14.02, at 14-3.
12 922 P.2d 248 (Alaska 1996).
13 Id. at 267.
14 Id.
15 Id. (quoting 3 Herbert Newberg & Alba Conte, Newberg on
Class Actions 14.02, at 14-2 through 14-3 (3d ed. 1992)).
16 Id.
17 In deciding that absent class members, at least those
identified on an opt-out basis, cannot be held liable for a
successful defendants attorneys fees or costs, a California court
of appeals noted that [i]n reaching this result, we have not been
aided by any direct authority; indeed, this appears to be a very
novel issue. Earley v. Superior Court, 95 Cal. Rptr. 2d 57, 64
(Cal. App. 2000).
18 699 P.2d 343 (Alaska 1985).
19 Id. at 345.
20 Id. (internal quotation omitted).
21 Id.
22 Id.
23 Id. at 349.
24 536 U.S. 1, 4 (2002).
25 Id. at 4-6.
26 Id. at 6.
27 Id. at 9-10.
28 Id. at 10.
29 Id.
30 445 U.S. 326, 339 (1980).
31 See Earley v. Superior Court, 95 Cal. Rptr. 2d 57, 66-
67 (Cal. App. 2000).
32 Absent class members are absent, unnamed parties who
did not initiate the action . . . . 1 Herbert Newberg & Alba
Conte, Newberg on Class Actions 1.03, at 1-11 (3d ed. 1992).
33 While it is possible for an absent class member to opt
out of a class and settle individually with defendant, such
scenarios are unlikely because [a]fter a class is certified, a
defendants settlement with any individual plaintiff, or even the
sole named plaintiff, will ordinarily not diminish the exposure
to liability of the defendant to claims from the rest of the
class. 2 Herbert Newberg & Alba Conte, Newberg on Class Actions
11.14, at 11-18 through 11-19 (3d ed. 1992). It should be noted
that any absent class member may object to a settlement. Id.
11.55, at 11-132. However, we need not address the issue of
whether absent members who become active at some point during the
litigation are liable for attorneys fees.
34 Bozarth v. Atlantic Richfield Oil Co., 833 P.2d 2, 4
n.3 (Alaska 1992).
35 95 Cal. Rptr. 2d at 64.
36 Id. at 58, 67.
37 Id. at 67.
38 Id.
39 Id. at 65.
40 Id. at 67.
41 Id.
42 Id.
43 742 F.2d 541, 542 (9th Cir. 1984).
44 Id. at 542-43.
45 Id. at 543 & 545.
46 Id. at 545.
