With the exception of Supreme Court rulings or groundbreaking appellate opinions, there is little that counts as "breaking news" in the class-action world. But a lead-counsel appointment in the Southern District of New York has drawn so much coverage in the last twenty-four hours that it seems worth at least a brief discussion on a Friday morning.

The case is In re Gildan Activewear Inc. Securities Litigation. Judge Baer’s order appoints class counsel, and imposes a diversity requirement on the plaintiffs’ firms (Robbins Geller and Labaton Sucharow). The relevant language:

"WHEREAS this proposed class includes thousands of participants, both male and female, arguably from diverse backgrounds, and it is therefore important to all concerned that there is evidence of diversity, in terms of race and gender, in the class counsel I appoint, see In re J.P. Morgan Chase Cash Balance Litigation, 242 FRD 265, 277 (S.D.N.Y. 2007); it is hereby"

"ORDERED that Co-Lead Counsel, Robbins Geller Rudman & Dowd LLP and Labaton Sucharow LLP, shall make every effort to assign to this matter at least one minority lawyer and one woman lawyer with requisite experience; and it is further …"

"ORDERED that the parties shall appear for a preliminary approval hearing on October 7, 2010, at 12:30 p.m., at which point Plaintiffs’ compliance with the diversity requirement, as well as the other requirements listed here, will be evaluated …"

(Emphasis added.)  This is not the first time Judge Baer has imposed this requirement. (And I’m not sure why this order has drawn more attention than the last one.) Nonetheless, it’s clear that the discussion around this particular order raises at least three questions:

Can Judge Baer do this? Yes. Leaving aside the fact that he’s a judge, he’s got discretion to do something exactly like this according to Rule 23(g), which regulates the appointment of class counsel.  That rule, in full:

(g) Class Counsel.
(1) Appointing Class Counsel.
Unless a statute provides otherwise, a court that certifies a class must appoint class counsel. In appointing class counsel, the court:
(A) must consider:
(i) the work counsel has done in identifying or investigating potential claims in the action;
(ii) counsel’s experience in handling class actions, other complex litigation, and the types of claims asserted in the action;
(iii) counsel’s knowledge of the applicable law; and
(iv) the resources that counsel will commit to representing the class;
(B) may consider any other matter pertinent to counsel’s ability to fairly and adequately represent the interests of the class;
(C) may order potential class counsel to provide information on any subject pertinent to the appointment and to propose terms for attorney’s fees and nontaxable costs;
(D) may include in the appointing order provisions about the award of attorney’s fees or nontaxable costs under Rule 23(h); and
(E) may make further orders in connection with the appointment.

Most lawyers focus on 23(g)(1)(A), which gives the factors they must meet, and there’s nothing about racial or gender diversity there. But, 23(g)(1)(B) mentions that the Court "may consider any other matter pertinent to counsel’s ability to fairly and adequately represent the interests of the class." This is the justification Judge Baer used back in 2007 in In re JP Morgan ("The proposed class includes thousands of Plan participants, both male and female, arguably from diverse racial and ethnic backgrounds. Therefore, I believe it is important to all concerned that there is evidence of diversity, in terms of race and gender, of any class counsel I appoint.") Class counsel are aware, at least on a visceral level, that this requirement can include almost anything.  So it would appear that Judge Baer has the discretion to do so.

Should he do this? That really depends on one’s political outlook. I’m a practicing class action lawyer; I’m more interested in strategy than policy. But, it appears that the strongest arguments on each side are probably:

  • "Public lawyers" ought to be diverse. Governments everywhere have minority contracting requirements or opportunities. Why should courts be any different when they appoint class counsel? Many class-action lawyers already claim to be "public lawyers." [https://www.classactioncountermeasures.com/2010/06/articles/certification-1/are-class-actions-public-or-private-cases/] If so, there’s no reason not to impose some of the same conditions we impose on government contractors.
  • Diversity doesn’t have much to do with securities law. In re JP Morgan (which was an age discrimination and ERISA case) the link between the diversity of counsel and the diversity of the class was at least marginally stronger. (Although Judge Baer did not require the firms to provide any aged lawyers.) It’s harder to say why one’s gender or racial background would affect their understanding of the securities laws, particularly when their clients are institutional investors, as opposed to individuals. And my guess is that, to the extent that either firm opposes the order, this is the line of argument they follow.

What does it mean that he did this? First, Judge Baer’s order may tip the balance to Robbins Geller being lead counsel. A (very) quick trawl through both Robbins Geller’s and Labaton Sucharow’s websites shows that Robbins Geller has the requisite levels of diversity. Labaton, however, does not appear to have any female partners or senior partners. (It does have two female "Of Counsel.") If Judge Baer decides that partnership is the "requisite level of experience" (no guarantee), Labaton may have difficulty meeting that criterion.

Second, given how competitive plaintiffs’ counsel already are in seeking lead counsel appointments, Judge Baer’s order changes the game, at least for firms in the class-action-rich Southern District of New York. Expect to see a number of plaintiffs’ firms reevaluating their hiring and attorney-development policies. And I would also guess we may see some firms use their diverse teams as a selling point in lead-counsel battles.

Finally, Judge Baer’s order suggests a possible adequacy-of-counsel argument for defendants. Given the personal and political volatility of diversity debates, it’s an argument that counsel should deploy carefully. But, if a firm finds itself defending a Title VII class action in the Southern District of New York, it may well be worth it to bring plaintiffs’ counsel’s lack of diversity to the court’s attention.