It’s no secret that discovery in class actions can be abused to serve goals that have nothing to do with the merits of the case. In some cases, plaintiffs will use the threat of extensive discovery to leverage settlements. In others, plaintiffs may use their proto-class status as excuse for a fishing expedition for new clients or causes of action. It may seem like there’s not much a defendant can do to combat these abuses, but a 30-year-old case – Oppenheimer Fund v. Sanders – offers one possible solution.

In Oppenheimer, the named plaintiffs sued Oppenheimer Fund for failing to disclose that it had invested in a set of overvalued “restricted” securities that had artificially inflated its earnings, and resulted in investment losses for the proposed class. As part of their discovery, the plaintiffs demanded a list of all class members, to be used as a starting point for the notice they would eventually have to send. The trial court originally ruled that Oppenheimer would have to pay 90% of the costs of compiling the class list.

At the same time as plaintiffs moved to certify a class, the Second Circuit reversed the trial court. So the plaintiffs deposed several of Oppenheimer’s employees, and then moved to redefine the class to include only those people who still held shares in the Oppenheimer Fund. Then, they proposed that notice be included in one of Oppenheimer’s regular mailings to its shareholders.

The procedural issues in the case grew even more complex, and eventually reached the Supreme Court. For our purposes, the Court made several statements worth remembering. First, it ruled that any orders compelling a defendant to assist in compiling information for class notice are governed by Rule 23(d), not the federal rules governing discovery. Second, it stated that while discovery under the federal rules is necessarily broad, it

like all matters of procedure, has ultimate and necessary boundaries.

More importantly, once it examined the conduct of discovery in the case, the Court also held that

Respondents’ attempt to obtain the class members’ named and addresses cannot be forced into the concept of “relevancy” described above.

(Emphasis added.) How is that useful for class-action defendants? Oppenheimer objections can be used to block plaintiffs’ attempts to use discovery to accomplish goals unrelated to the merits of the litigation. For example, plaintiffs do not have the right to:

  • sidestep the burden of assembling notice; or
  • get themselves a list of possible new clients

through discovery. And objections based on Oppenheimer can help protect the defendant from this particular abuse of the discovery process.