Md.’s first defendant class action may be its only after rules change

A lawsuit against a class of defendants in Montgomery County may be the first and last of its kind for the foreseeable future after the Court of Appeals voted to bar defendant class actions beginning June 1.

After the lawsuit came to its attention, the Standing Committee on Rules of Practice and Procedure recommended in a March report that the rule permitting a class “to sue or be sued” be amended to allow only plaintiff class actions. The committee cited the “relative paucity of these kinds of actions” and “little guidance on some of these issues.”

The Court of Appeals adopted the rules committee’s recommendation in a rules order last week following a public hearing.

Defense attorneys praised the change as a protection of the rights of individual defendants, but consumer rights attorneys raised concerns about removing a tool that appears to have worked in the one case in which it was used.

The lawsuit, filed in 2015, resulted in a $22 million judgment against G&G Towing, known for its “aggressive and predatory tactics.” The plaintiff classes also sued a class of defendant businesses that contracted with the company to tow cars from their lots.

Montgomery County Circuit Judge Ronald B. Rubin certified the defendant class in November 2016. According to the rules committee report, it appears to be the only time an action against a class of defendants has been filed in the state, though the rules have allowed it for more than 30 years.

Retired Court of Appeals Judge Alan M. Wilner, chair of the rules committee, said Monday the case was brought to the committee’s attention last fall because the defendants were lobbying for a rule that would allow them to appeal a judge’s decision on whether to certify a class. Wilner said a ruling on certification is often a “death knell” in a lawsuit, driving one side or the other to settle or reevaluate.

The committee determined that only the legislature — and not the rules committee — could make class certification subject to appeal. However, once the issue was before them, rules committee members raised concerns about defendant class action cases in general, Wilner said.

The committee has not ruled out revisiting defendant classes in the future, he added.

“If we can get a handle on how the federal courts or how some of the state courts that have gotten into this have dealt with these issues, then we can can look at that and have a better sense of how we can put some controls on this thing or whether there need to be any,” Wilner said.

The rules change goes into effect June 1 and is not retroactive, leaving open the possibility that at least one other defendant class could still be certified in Maryland. A potential class action, filed in Baltimore City Circuit Court in March, alleged a class of property owners and managers illegally tried to collect “time-barred consumer debt” by filing lawsuits over residential lease breaches after the three-year statute of limitations expired.

A judge has not ruled on class certification in that case.

The cases are Quan-En Yang et al. v. G & C Gulf Inc. et al., 403885V (Montgomery County) and Brittany Simmons et al. v. The Maryland Management Company et al., 24C19001317 (Baltimore city).

‘Knee-jerk reaction’

Richard S. Gordon, lead counsel for the Montgomery County towing case, said in a letter to the court in April that prohibiting all defendant classes “based upon a sample of one” would be a “knee-jerk reaction with far-reaching consequences.” He wrote that despite a dearth of examples in Maryland, case law from around the country exists, as does scholarly work about defendant class actions.

Gordon, of Gordon, Wolf & Carney Chtd. in Towson, declined to comment on the court’s rules order Wednesday but said he stood by his comments in the letter.

Gordon argued the lawsuit has been well-managed and “returned millions of dollars to consumers in Montgomery County” and called defendant classes “a valid and important litigation tool in the appropriate case.”

Eric Friedman, the director of the Office of Consumer Protection for Montgomery County, agreed, saying Wednesday that the towing case “had a significant and substantial impact on predatory and overly aggressive towing practices in Montgomery County.”

Instances of predatory towing in the county, once the No. 1 source of complaints to Friedman’s office and the subject of national media coverage before the lawsuit, has slowed since the case was filed and settlements began, according to Friedman.

“It notified property owners that contract with towing firms that they too are responsible (for ensuring) the agent they hire, the towing company they hire, (complies) with the law,” he said.

When informed of the rules change Wednesday, Friedman said that though the case was unusual, the defendant class action “seemed to fit the bill” for the towing lawsuit, which involved more than 500 defendants.

“Class action lawsuits are an absolute necessity to protect consumers, and anything that would inhibit the ability to access class actions … would run counter to being able to protect consumers,” he said.

‘Sound thing to do’

The defense attorneys who lobbied for the rules change, all of whom have clients in the towing litigation, contended that the class action denied their clients’ rights and warned of future problems.

“The utility of defendant class actions is so minimal, and the constitutional risk so severe, that it is appropriate to amend Rule 2-231 at this time to prevent future defendant class actions,” attorney Gardner M. Duvall wrote in a letter to the court supporting the rules change.

Duvall, of Whiteford Taylor Preston LLP in Baltimore, said Wednesday the change was “a sound thing to do.”

In the Montgomery County litigation, some businesses that were part of the class never received notice until the first potential settlement agreement was reached and after a lot of the legal arguments had come and gone, according to defense attorneys who supported the rules change. They added that the representative defendant was named over his objection, raising concerns about how adequately he would represent the other businesses.

Anthony F. Cavanaugh, of Linowes and Blocher LLP in Bethesda, wrote in his letter to the court that a member of a plaintiff class action can become a “passive beneficiary” if the representative succeeds in getting an award, but an unaware defendant risks liability based on someone else’s litigation strategy.

Duvall said there are other ways to litigate cases with multiple defendants besides taking an “obscure” tool and having it “dragged into the present.”

“With this experience, I really don’t see a good reason to have (defendant class actions), in part because there’s just other ways to deal with numerous defendants,” he said.