Fifth Circuit Holds that Class Rep. Can Achieve Adequacy Based on Retention of Outside Lawyer Unaffiliated with Class Counsel

In Feder v. Electronic Data Systems Corp., --- F.3d ----, 2005 WL 2757510, (5th Cir. Oct. 24, 2005) the State of New Jersey was named lead plaintiff in a securities class action. New Jersey engaged retired New Jersey Superior Court Judge C. Judson Hamlin (Hamlin) to oversee securities class actions in which New Jersey was involved, including this one. The defendants challenged the adequacy of New Jersey as class representative based on their arrangement with Hamlin:

Appellants note that Hamlin is an "outside lawyer" for New Jersey, and they claim that his involvement violates Berger I. [Berger v. Compaq Computer Corp., 257 F.3d 475, 478 (5th Cir.2001)]. In discussing the adequacy standards of Rule 23 in Berger I, however, we addressed the relationship between the class representative and the class counsel. We did not address the present situation in which another attorney, not affiliated with class counsel, is engaged by the class representative to assist it in its monitoring of class counsel. The guidelines in Berger I do not prevent a proposed class representative from hiring an outside attorney (not affiliated with class counsel) to help the class representative in carrying out its role as such and in overseeing proposed class counsel, as long as that outside attorney has no conflicts with the class.