Speaks et al v. U.S. Tobacco Cooperative, Inc.

Filing 328

ORDER granting 314 Motion to Clarify Findings Regarding Mediation and Settlement Process in February 20, 2018 Order. Signed by District Judge James C. Dever III on 3/27/2020. (Sellers, N.)

IN TIIE UNITED STATES DISTRICT COURT
FOR TIIE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DMSION
No. S:12-CV-729-D
TERESA M. SPEAKS, TOBY SPEAKS,
STANLEY SMITH, EDDIE BROWN,
ROBERT POINDEXTER, MIKE MITCHELL,
ROY L. COOK, ALEX SHUGART,
H. RANDLE WOOD, ROBIN ROGERS,
and DANIEL LEE NELSON,

)
)
)
)
)
)
)
)
Plaintiffs,
)
)
v.
)
U.S. TOBACCO COOPERATIVE, INC. f/k/a )
FLUE-CURED TOBACCO COOPERATIVE )
)
STABILIZATION CORPORATION,
)
)
Defendant.

ORDER

On October 31, 2012, plaintiffs, on behalfofthemselves and the class they seek to represent,

filed a complaint against U.S. Tobacco Cooperative, Inc. (the "Cooperative" or "defendant'') [D.E.
1]. Plaintiffs are members of the Cooperative and current or form.er flue-cured tobacco farmers.
When plaintiffs filed this federal complaint, a competing putative class action by a different group
of Cooperative members was pending against the Cooperative in Wake County Superior Court (the
"Lewis/Fisher'' action). On December 5, 2012, the parties in this federal case jointly moved to stay
this case pending the outcome of a motion for class certification in the Lewis/Fisher action. See
[D.E. 18]. On December 17, 2012, the court granted the motion to stay. See [D.E. 22].
The litigation in the Lewis/Fisher action concerning class certification took longer than
anticipated, and this court granted numerous joint motions to stay. See [D.E. 23, 26-40]. On
December 21, 2016, the Supreme Court of North Carolina affirmed the Wake County Superior

Court's order granting class certification in the Lewis/Fisher action. See Fisher v. Flue-Cured
Tobacco Coop. Sta.bilmltion Corp .• 369 N.C. 202, 794 S.E.2d 699 (2016).
On May 11 and 12, 2017, pursuant to this court's local rules mandating mediation, the parties

in this federal case participated in a two-day mediation with the Honorable Frank W. Bullock, Jr.
("Judge Bullock''), a distinguished, retired United States District Judge and certified mediator. After
extensive negotiations, the parties in this putative federal class action reached a $24 million proposed
class action settlement agreement. See [D.E. 60-1]. On September 8, 2017, plaintiffs moved to
certify a settlement class and for preUminary approval of the proposed class action settlement [D.E.

60]. On September 13, 2017, this court entered an order preUminarily approving the class action
settlement and scheduled a final fairness hearing for January 19, 2018 [D.E. 63].
On January 5, 2018, plaintiffs moved for final approval of the class action settlement [D.E.

216]. On January 17, 2018, the Wake County Superior Court issued an order and found that
plaintiffs' class counsel in Speaks and defendant's counsel from Washington, D.C. in Lewis/Fisher
had violated the North Carolina Rules of Professional Conduct. See [D.E. 252-2]. In its order of
January 17, 2018, the Wake County Superior Court specifically found: (1) incomplete, false, and
misleading allegations in the Speaks plaintiffs' amended complaint; (2) misstatements in the long
form notice sent to the absent class members in Speaks: and (3) various ethical violations and
"collusion" during the Speaks mediation process. See id. ,r,f 10+:-23. The Wake County Superior
Court also found "ample evidence of collusion between the parties in Speaks to (a) exclude counsel
in Lewis/Fisher from participation in the settlement ofthe claims for the class members whom they
represent, and ([b]) mislead the members ofthe Lewis/Fisher class as to the true facts ofthe matter."

Id ,r 126; cf. Sharp Farms v. Speaks, 917 F.3d 276, 292-93 (4th Cir. 2019) (smmnar:izing the state
court order ofJanuary 17, 2018). The Wake County Superior Court opined that the proposed Speaks
2

settlement was not fair, reasonable, and adequate to the members ofthe certified Lewis/Fisher class,
which overlapped with the proposed Speaks settlement class. See [D.E. 252-2] ,r 125.
On January 19, 2018, this court held a final fairness hearing. See [D.E. 259]; [D.E. 260].
On February 20, 2018, the court entered an 82-page order and found that the proposed Speaks class

action settlement was fair, reasonable, and adequate to all class members and granted the motion for
final approval of the class action settlement [D.E. 267]. As part of that order, this court discussed

at length the facts and procedural history and the Wake County Superior Court order of January 17,
2018, and explained why this court did not agree with the Wake County Superior Court order. See
id. at2-3, 12-14, 16--17, 26--27, 39-44, 46-49, 57-61, 64-73.
Some objectors to the settlement appealed this court's judgment approving the Speaks class
action settlement [D.E. 282,284]. On February 28, 2019, the United States Court ofAppeals for the
Fourth Circuit affirmed in part, reversed in part, and remanded [D.E. 301, 306]. In relevant part, the
Fourth Circuit held that this court abused its discretion in certifying the Speaks settlement class
under Rule 23(a) and in finding that the Speaks class counsel was adequate. A majority of the
Fourth Circuit panel found that this court did not "sufficiently'' address the factual findings and
conclusions ofthe Wake County Superior Court concerning alleged unethical conduct ofplaintiffs'
class counsel in Speaks and defendant's counsel from Wasbingtnn, D.C. See Sharp Farms, 917 F.3d
at290-94.
On April 26, 2019, the Wake County Superior Court vacated "[t]hat portion of [its order of

January 17, 2018] that finds and concludes that counsel for the Defendant in this action and counsel
for the Plaintiff in the Speaks Action violated Rules 4.1 and 4.2 of the North Carolina Rules of

3

Professional Conduct .... " [D.E.309-S] 2; cf. [D.E. 2S2-2]. 1 Rule 4.1 ofthe North Carolina Rules
of Professional Conduct provides that "[i]n the course of representing a client a lawyer shall not
knowingly make a false statement of material fact or law to a third person." N.C. R. Prof. Conduct
4.1. Rule 4.2 of the North Carolina Rules of Professional Conduct provides:
(a) During the representation of a client, a lawyer shall not communicate about the
subject of the representation with a person the lawyer knows to be represented by
another lawyer in the matter, unless the lawyer has the consent of the other lawyer or
is authorized to do so by law or a court order. It is not a violation of this rule for a
lawyer to encourage his or her client to discuss the subject ofthe representation with
the opposing party in a good-faith attempt to resolve the controversy.
(b) Notwithstanding section (a) above, in representing a client who has a dispute with
a government agency or body, a lawyer may communicate about the subject of the

representation with the elected officials who have authority over such government
agency or body even if the lawyer knows that the government agency or body is
represented by another lawyer in the matter, but such communications may only
occur under the following circumstances:
·
(1) in writing, if a copy of the writing is promptly delivered to opposing counsel;
(2) orally, upon adequate notice to opposing counsel; or
(3) in the course of official proceedings.
N.C. R. Prof. Conduct 4.2.
In the portion ofthe now vacated order ofJanuary 17, 2018, the Wake County Superior Court
had found:
(1) a pattern of false and misleading statements made by counsel for plaintiff in
Speaks as they relate to Lewis/Fisher and its certified class members; (2) Counsel
for Defendant .has, at a minimum, acquiesced in such statements if not having
adopted them; and (3) Defendant and counsel for plaintiff in Speaks have violated
Rules 4.1 and 4.2 of the North Carolina Rules of Professional Conduct in their
communications with the Lewis/Fisher class members.
1

Cf. Henleev. Union Planters Nat. Bank& Trust Co., 33S U.S. S9S, 600 (1949) (percuriam)
(Frankfurter, J., dissenting) ("Wisdom too often never comes, and so one ought not to reject it merely
because it comes late.").
4

[D.E. 252-2] ,r 103; see also id. ff 111-12, 114, 123, 126.
On May 20, 2019, the Cooperative moved to clarify this court's findings concerning the

conduct ofplaintiffs' co~l in Speaks and defendant's counsel from Washington, D.C. [D.E. 314]
and filed a memorandum and exhibits in support [D.E. 315]. On May 22, 2019, plaintiffs responded
and stated that they did not oppose defendant's statement of facts, legal arguments, or request for
relief [D.E. 316]. As explained below, the court grants defendant's motion to clarify and finds that
plaintiffs' counsel in Speaks and defendant's counsel in this action and in Lewis/Fisher did not
violate the North Carolina Rules ofProfessional Conduct or otherwise engage in unethical conduct.
I.
Federal courts have inherent power to police attorney misconduct. See Chambers v. NASCO,
Inc., 501 U.S. 32, 55 (1991); Six v. Generations Fed. Credit UnioJL 891 F.3d 508, 518-19 (4th Cir.
2018); United States v. Oliver, 878 F.3d 120, 124 (4th Cir. 2017); United States v. Shaffer Equip.
Co., 11 F.3d 450, 462 (4th Cir. 1993). Thus, this court can "fashion an appropriate sanction for
conduct which abuses the judicial process," including any violation of the North Carolina Rules of
Professional Conduct.

~

891 F.3d at 519 (quotation omitted); see Howard v. Coll. of the

Albemarle,No.2:15-CV-39-D,2016WL4384658,at*4-5(E.D.N.C.Aug.16,2016)(unpublished);
E.D.N.C. Civ. R. 83. 7d. Moreover, in ruling on a proposed settlement in a class action, a district
court acts as a :fiduciary of the class members and must ensure that class counsel is adequate.
See Fed. R. Civ. P. 23; Shmp Farms, 917 F.3d at 293-94. Accordingly, in accordance with the
Fourth Circuit's mandate in Speaks, this court enters this order to more "sufficiently'' address the
findings and conclusions of the Wake County Superior Court's order of January 17, 2018, and of
April 26, 2019, which vacated that portion of the January 2018 order finding that defendant's

5

counsel from Wasbingt.on, D.C. in the Lewis/Fisher action and plaintiffs' counsel in Speaks violated
Rules 4.1 and 4.2 of the North Carolina Rules of Professional Conduct.
A.
As for the Wake County Superior Court's findings that plaintiffs' counsel in Speaks colluded
to create a false public narrative concerning the Lewis/Fisher action in violation ofRules 4.1 and 4.2

ofthe North Carolina Rules ofProfessional Conduct, the Wake County Superior Court vacated these
findings on April 26, 2019. See [D.E. 309-5] 2. Thus, there is nothing to address. Cf. Sharp Farms,
917 F.3d at 293-94.
Alternatively, to the extent that the Fourth Circuit's mandate requires this court to more
"sufficiently'' address the state court's now-vacated findings, the court sees why the Wake County
Superior Court vacated its findings that plaintiffs' counsel in Speaks or defendant's counsel from
Washington, D.C. violated either Rule 4.1 or 4.2 of the North Carolina Rules of Professional
Conduct.2
First, defense counsel from Washington, D.C. did not implicitly adopt any alleged
misrepresentations in plaintiffs' amended complaint in Speaks by failing to correct them, as the
Wake County Superior Court found in the now-vacated portion ofits order. See [D.E. 252-2] ,r 111.
Moreover, defense counsel from Washington, D.C. did not have a duty to verify the factual

2

The Wake County Superior Court order of January 17, 2018, impugned the integrity of
defense counsel from Washington, D.C., but expressly declined to impugn the integrity of defense
counsel from North Carolina. See [D.E. 252-2] 6 n. 7. Nothing in the order explains the distinction.
The law does not support the distinction. -See N.C. R. Prof. Conduct 5.5(c)(4); N.C. Gen. Stat. § 844.1(5); In re Smith, 301 N.C. 621, 621-33, 272 S.E.2d 834, 835-41 (1981). Moreover, this court
has serious concerns about whether the attorneys received due process. See In re Ruffalo, 390 U.S.
544, 550-52 (1968); Griffin v. Griffin, 348 N.C. 278, 280, 500 S.E.2d 437, 438-39 (1998); N.C.
State Bar v. Barrett, 219 N.C. App. 481, 485-89, 724 S.E.2d 126, 129-31 (2012). In any event, as
discussed in this order, neither defense counsel from Washington, D.C. nor defense counsel from
North Carolina violated Rule 4.1 or 4.2 or otherwise engaged in any unethical conduct.
6

statements of plaintiffs' amended complaint in Speaks, which made serious legal claims against
defense counsel's client.. This principle applies even if defense counsel from Washington, D.C.
reviewed proposed changes to, and made suggestions concerning, plaintiff's amended complaint.
Such review comports with this court's local rules concerning motions practice. See E.D.N.C. Civ.
R. 7.l(b)(2) ("If a moving party is aware that an opposing party consents or does not object to a

motion, the motion shall so state."). Thus, the court sees why the Wake County Superior Court
vacated its order imputing alleged misrepresentations in the Speaks plaintiffs' amended complaint

Second, in finding that plaintiffs' counsel in Speaks created a false public narrative in the
amended complaint, the Wake County Superior Court emphasized that Shipman & Wright LLP,
counsel for the Speaks plaintiffs and initial counsel for the Lewis/Fisher plaintiffs, alleged that it
withdrew from representation ofthe Lewis/Fisher plaintiffs on September 9, 2005. See [D.E. 252-2]

,r 105; [D.E. 315-4] 26 ,r 61.

Shipman & Wright LLP in fact withdrew at a later date. Shipman &

Wright, LLP, however, corrected this error in its amended complaint. See Am. Compl. [D.E. 320].
Moreover, considering the pleading~ as a whole, it always has been clear that Shipman & Wright
LLP did not withdraw on September 9, 2005. See,~ [D.E. 315-4] 25-27 ,Mr 57-58, 66, 68.
Additionally, based on this court's own credibility assessment ofplaintiffs' counsel in Speaks, this
erroneous date was not an intentional false statement of material fact. See Hr'g Tr. [D.E. 260] 10.
Rather, it was an honest, immaterial, and innocent mistake. Even the Wake County Superior Court
acknowledged that the erroneous date could be an innocent mistake, but then cited no evidence and
found that it was an intentional misrepresentation. See [D.E. 252-2] ,Mr 105-06. Accordingly, the
court sees why the Wake County Superior Court vacated its finding that plaintiffs' counsel in Speaks
knowingly misrepresented the date that Shipman & Wright LLP withdrew.
7

The Wake County Superior Court also found that various alleged factual omissions from the
original Speaks complaint amounted to "an attempt by plaintiffs' counsel in Speaks to, at best,
manipulate facts in order to construct'' a false narrative concerning the state court litigation. Id. ,r
110. The Wake County Superior Court also impugned the integrity and professional responsibility
of defense counsel from Washington, D.C. by finding:
111. Counsel for Defendant cannot distance itselffrom these misstatements as, when
it took steps to provide input to and edit the Amended Class Action Complaint it
failed to correct this false narrative and this Court thereby finds that Defendant's
counsel has adopted these allegations as true.
Id. ,r 111. The Wake County Superior Court then opined ''that the facts in paragraph 107 above are
material to any member of the Lewis/Fisher class' consideration of opting out of the Speaks
settlement." Id.

,r 112.3

On April 26, 2019, the Wake County Superior Court vacated its findings that counsel

violated Rules 4.1 and Rule 4.2. See [D.E. 309-5] 2. Thus, there is nothing to address.
3

In paragraph 107, the Wake County Superior Court wrote:

107. The Court finds the following facts were material to a complete and accurate
and full understanding of the Stipulation and Settlement Agreement and Motion to
Approve Proposed Settlement as alleged in the Speaks Class Action Complaint and
Amended Class Action Complaint: (a) Shipman & Wright, LLP was one of the law
firms that could have sent the notice of proposed settlement and failed to do so as
alleged; (b) Judge John Jolly had in fact denied the Motion to Approve Proposed
Settlement on May 10, 2006 finding that the "evidence presented [did] not support
a finding that the proposed Settlement is within the necessary 'ball park' of being
fair, reasonable and adequate"; (c) among others, Gaey K. Shipman had signed and
caused to be filed the Am.ended Stipulation & Agreement on or about April 3, 2007;
(d) William G. Wright on behalf of Shipman & Wright, LLC had signed and caused
to be filed the Second Motion to Approve Proposed Settlement on April 3, 2007; and
(e) by late summer of 2007, and before Shipman & Wright, LLP was allowed to
withdraw as counsel in Lewis, Plaintiffs' counsel for Lewis and Fisher had begun
negotiating a global settlement with Defendant.
[D.E. 252-2] ,r 107.

8

Alternatively, to the extent the Fourth Circuit's mandate requires this court to more
"sufficiently'' address the state court's now-vacated findings, the court sees why the Wake County
Superior Court vacated its findings. Notably, the Wake County Superior Court failed to explain why
these alleged statements or omissions were material to the Lewis/Fisher class members' decisions
concerning whether to opt out of the proposed Speaks settlement. See [D.E. 252-2]

~

112.

Furthermore, the Wake County Superior Court cited no evidence to support its finding that plaintiffs'
counsel in Speaks and defendant's counsel from Washington, D.C. misstated or omitted facts to
deceive the Lewis/Fisher class members. Additionally, the Wake County Superior Court's finding
that defendant's counsel from Washington, D.C. ''failed to correct this false narrative" and thereby

"adopted these allegations as true" is legally unsupported. Cf. E.D.N.C. Civ. R. 7.l(b)(2). The
amended complaint is plaintiffs' amended complaint. It is not a pleading of the defendant
Cooperative, and the Wake County Superior Court cited no evidence to support a finding that
defendant's counsel from Washington,

p.c. had the power to control what plaintiffs' counsel

ultimately included in or omitted from plaintiffs' amended complaint.
In light of the full record, the court understands why the Wake County Superior Court
vacated its unsupported findings that plaintiffs' counsel in Speaks or defendant's counsel from
Washington, D.C. made knowing material misrepresentations of fact or made knowing material
omissions. Moreover, the court finds that plaintiffs' counsel in Speaks and defendant's counsel from
Washington, D.C. did not violate Rule 4.1 or Rule 4.2 of the North Carolina Rules of Professional
Conduct.
The Wake County Superior Court also found that the conduct of the plaintiffs' counsel in
Speaks in drafting their amended complaint in this case and the defendant's counsel from
Washington, D.C.'s apparent failure to object to the plaintiffs' amended complaint violated Rule
9

4.2(a) of the North Carolina Rules of Professional Conduct. See [D.E. 252-2] ,r 112. The Wake
County Superior Court did not explain how statements or omissions in the Speaks amended
complaint (or any statements or omissions in any publicly filed pleadings in federal court) can
constitute unauthorized communications with a represented party in state court in violation of Rule
4.2(a). See N.C. R. Prof. Conduct 4.2(a). They cannot. See id.; cf. U.S. Const. art. VI, cl. 2. Thus,
the court understands why the Wake County Superior Court vacated its :findings that either counsel
violated Rule 4.2(a). Counsel did not violate Rule 4.2 of the North Carolina Rules of Professional
Conduct.

B.
As for the Wake County Superior Court's findings concerning the long form notice in this

federal case [D.E. 60-2], the Wake County Superior Court found that plaintiffs' counsel in
Speaks and defendant's counsel from Wasbingt.c>n, D.C. knowingly edited the long form notice in
order to obscure the legal effect of the settlement in Speaks on the claims of members of the
Lewis/Fisher class and thereby violated Rules 4.1 and 4.2 of the North Carolina Rules of
Professional Conduct. See [D.R 252-2] ,r,r 113-14. On April 26, 2019, the Wake County Superior
Court vacated its finding that counsel violated Rules 4.1 and 4.2 of the North Carolina Rules of
Professional Responsibility concerning the long form notice in this federal case. Compare [D.E.
309-5] 2 with [D.E. 252-2] ,r,r 113-14. Thus, there is nothing to address. Cf. Shatp Farms, 917
F.3d at 293-94.
Alternatively, to the extent that the Fourth Circuit's mandate requires this court to more
"sufficiently'' address the state court's now-vacated findings, this court sees why the Wake County
Superior Court vacated its finding that counsel for plaintiffs in Speaks and counsel for the defendant
from Washington, D.C. violated Rule 4.1 or Rule 4.2 of the North Carolina Rules of Professional
10

Conduct concerning the long form notice. First, under the Federal Rules of Civil Procedure, this
court had an obligation to provide notice ofthe proposed Speaks settlement to absent class members,
including any overlapping members of the parallel Lewis/Fisher class. See Fed. R. Civ. P.
23(c)(2)(B), (e)(1 )(B). Thus, this court, not the Speaks class counsel or the defendant's counsel from
Washington, D.C., was ultimately responsible for the text of the long form notice. See,~ Culver
v. City of Milwaukee, 277 F.3d 908, 915 (7th Cir. 2002); Erhardt v. Prudential Grp .. Inc., 629 F.2d
843, 846 (2d Cir. 1980). This court diligently reviewed the contents of the proposed long form
notice and approved it, in part, because it "clearly details how the Speaks action affects the
[Lewis/Fisher] action." Speaks v. U.S. Tobacco Coop., Inc., 324 F.R.D. 112, 157 (E.D.N.C. 2018),
rev' d sub nom., Sharp Farms, 917 F.3d at 281, 293-94. Ill making this finding, this court explained
in detail why it rejected the argument that the notice program ambiguously states how the settlement
affects the Lewis/Fisher class. See Speaks. 324 F.R.D. at 157-58. This court then discussed and
quoted from the short form notice, the long form notice (section six), and the settlement website.
See id. This court also noted the different timing associated with the notice programs in the parallel
class actions. See id. at 158. Ironically, the Wake County Superior Court criticized this court's
description ofthe Lewis/Fisher class action in the notice program in this federal class action, but the
notice that the Wake County Superior Court approved in the Lewis/Fisher class action did not
mention the Speaks class action at all. See id. at 157 n.33.
Second, federal law governs the content and distribution of the long form notice and the
notice program. See Fed. R. Civ. P. 23(c)(2)(B), (e)(l)(B); Speaks, 324 F.R.D. at 157-58. This
court credited the expert testimony concerning the long form notice and the notice program in
finding that the notice program comported with applicable federal law. See Speaks, 324 F.R.D. at
157-58; [D.E. 58-1] ft 62--66; [D.E. 217-5] ft 36-38. Moreover, the Wake County Superior Court
11

did not identify any binding or persuasive authority requiring the long form notice to state anything
beyond what was in the short form notice, the long form notice, and on the settlement website
concerning the effect of the federal settlement on the Lewis/Fisher class action. Indeed, the notice
in this case went further than required. After all, class notice is sufficient where it adequately
informs the class of other pending class actions or putative class actions and provides the names,
case numbers, and courts of those other actions and thereby permits class members to investigate
those other actions. See Inre CP Ships Ltd. Sec. Litig., 578 F.3d 1306, 1317 (11th Cir. 2009) (class
notice sufficient where it "adequately informed class members ofthe pending [foreign actions]" and
provided ''the necessary information" so that plaintiffs could pursue that information), abrogated on
other grounds~ Morrison v. Nat'l Australia Bank Ltd., 561 U.S. 247 (2010); Churchill Village,
L.L.C. v. Gen. Blee., 361 F.3d 566,575 (9th Cir. 2004) (class notice sufficient where it "listed the
names, case numbers, and courts" of other pending actions).4 Thus, to the extent the Wake County
Superior Court did not vacate its findings concerning the long form notice on April 26, 2019, the
court rejects the Wake County Superior Court's findings that the long form notice omitted material
information to mislead the Lewis/Fisher class. See Speaks, 324 F.R.D. at 157-58. It did not.
The long form notice stated that the Speaks settlement "could impact'' the Lewis/Fisher class
members and that the Lewis/Fisher claims ''may be discontinued" ifthis court approved the Speaks
settlement. [D.E. 60-2] 4. These statements reflect an intent to avoid making premature statements
concerning the potential preclusive effect of the proposed Speaks settlement on the claims of the

4

In fact, class notice does not necessarily even require notice of other pending parallel class
actions or settlement offers in such class actions. See Faught v. Am. Home Shield Corp.. 668 F.3d
1233, 1239-40(11thCir. 2011); Int'l Union v. Gen. MotorsCo.,497F.3d615, 630 (6th Cir. 2007);
Bell Atl. Corp. v. Bolger, 2 F.3d 1304, 1317-18 (3d Cir. 1993); Maherv. Zapata Corp., 714 F.2d
436, 450-53 (5th Cir. 1983); In re Prudential Ins. Co. of Am. Sales Practicies Litig., 962 F. Supp.
450, 529 (D.N.J. 1997).
12

Lewis/Fisher class members. See,~ Churchill Village, L.L.C .• 361 F .3d at 575. Indeed, after this
court granted final approval of the proposed Speaks class settlement, counsel for the
Lewis/Fisher plaintiffs argued to the Wake County Superior Court that the Speaks settlement did not
prevent the Lewis/Fisher class action from proceeding. See [D.E. 315-9] 5. The Wake County
Superior Court lacked evidence to support its findjng that the long form notice contained knowing
misrepresentations and understandably vacated that portion of its order. Thus. the court finds that
plaintiffs' counsel in Speaks and defendant's counsel from Washington. D.C. did not violate Rule
4.1 or 4.2 in drafting the relevant language of the long form notice and submitting the long form
notice to this court for its review and approval.

C.
On January 17, 2018. the Wake County Superior Court found that plaintiffs' counsel in
Speaks and defendant's counsel from Washington, D.C. deliberately excluded the Lewis/Fisher class
counsel from the Speaks mediation with Judge Bullock and that counsel violated Rule 4.2(a) of the
North Carolina Rules of Professional Conduct concerning the mediation. See [D.E. 252-2]

,r,r

115-17. On April 26, 2019, the Wake County Superior Court vacated its finding that counsel
violated Rule 4.2(a) of the North Carolina Rule of Professional Conduct concerning the Speaks
mediation. See [D.E. 309-5] 2. Thus, thereisnothingtodiscuss. Cf. ShatpFarms. 917F.3dat294.
Alternatively, to the extent the Fourth Circuit's mandate requires this court to more
"sufficiently" address the state court's now-vacated findings. this court sees why the Wake County
Superior Court vacated its findings that counsel violated Rule 4.2(a) concerning the Speaks
mediation. First, this court's scheduling order and local civil rules required the Speaks parties to
mediate their claims. See Speaks. 324 F.RD. at 138. The state court's case management order in
Lewis/Fisher did not, and could not, limit the parties or their counsel in this federal action from
13

mediating this federal action pursuant to this federal court's scheduling order and local civil rules.
See id.; U.S. Const. art. VI, cl. 2; Howlett v. Rose, 496 U.S. 356, 371 (1990); Donovan v. City of
Dallas, 377 U.S. 408, 413-14 (1964).
On June 30, 2017, Judge Jolly also recognized that parallel litigation should continue in

Speaks and Lewis/Fisher after disclosure ofthe Speaks mediatio~ proposed settlement, and potential
preclusive effect. See [D.E. 315-3].5 Furthermore, the Wake County Superior Court recognized that
counsel in the Speaks case had to comply with this court's orders. See [D.E. 123-2] ,r2. Moreover,
although the Wake County Superior Court found that counsel in Speaks delayed in notifying the
Lewis/Fisher plaintiffs' counsel about the upcoming mediatio~ the Lewis/Fisher plaintiffs' counsel
knew about the mediation before it occurred and chose not to participate or seek to participate in the
Speaks mediation. See [D.E. 315-2] 12-14. Although the Lewis/Fisher plaintiffs' counsel raised
various ethical concerns about the mediation to plaintiffs' counsel in Speaks and defense counsel in
Speaks, plaintiffs' counsel in Lewis/Fisher never asked this court to prohibit the Speaks mediation
orto permit them to participate in the mediation. Thus, this court understands why the Wake County
Superior Court vacated its findings concerning Rule 4.2.
As for the mediation itself, retired United States District Judge Frank Bullock conducted the

mediation. The Wake County Superior Court order of January 17, 2018, failed to acknowledge
Judge Bullock's role as the mediator or discuss events that took place before the mediation with
Judge Bullock. See [D.E. 252-2]. Notably, before the mediatio~ defense counsel provided the
Lewis/Fisher plaintiffs' counsel's letter expressing their ethical concerns about the mediation to

5

Judge Jolly presided in Lewis/Fisher from 2005 until he recused on or about October 5,
2017. See [D.E. 315-6] 6-7. The judge who wrote the orders of January 17, 2018, and April 26,
2019, became the presiding judge in October 2017, after Judge Jolly recused. See id.
14

Judge Bullock. See [D.E. 315-2] 2, 12-17. Nevertheless, after reviewing those concerns, Judge
Bullock held the mediation in Speaks and certified that the proposed Speaks settlement was the
result of arms-length negotiations. See [D.E. 217-4]. Judge Bullock's wi]]jngness to hold the
mediation, even after reviewing the Lewis/Fisher plaintiffs' counsel's ethical'concerns, undermines
the validity ofthose concerns and undermines the state court's now-vacated findings concerning the
Speaks mediation. See, ~ Jones v. Sjnging River Health Servs. Found., 865 F.3d 285, 295-96
(5th Ch-. 2017); Galluci v. Gonzales, 603 F. App'x 533, 534 (9th Ch-. 2015) (unpublished); In re
Penthouse Exec. Club Comp. Litig., No. 10 Civ. 1145(KMW), 2013 WL 1828598, at *2 (S.D.N.Y.
Apr. 30, 2013) (unpublished). This court's review of the documents, the record, and the governing
law confirm that counsel acted properly in the mediation process.
Judge Bullock was not aware of the state court's factual findings of January 17, 2018,

because the mediation occurred on May 11 and 12, 2017. Nonetheless, Judge Bullock was aware
oftherelevantfactsunderlymgthosefindings. See,~ [D.E. 315-1]; [D.E. 315-2]. Specifically,
Judge Bullock was aware ofthe existence ofthe Lewis/Fisher class action, the interplay between that
action and the Speaks action in this court, the intent of the parties that the proposed
Speaks settlement could preclude some further litigation in the Lewis/Fisher action, that the
Lewis/Fisher class counsel did not participate in the mediation, and the ethical concerns that the
Lewis/Fisher class counsel had concerning the Speaks mediation. See [D.E. 252-8] 2; [D.E. 315-2]
1; [D.E. 73-23] 3; cf. [D.E. 315-2] 12-17. On May 12, 2017, at the conclusion of the mediation,
Judge Bullock certified that the Speaks mediation was the product of "sustained, arm's length
settlement negotiations." [D.E. 217-4] 1. In light of the full record before this court and Judge
Bullock's involvement as a neutral, ethical, and highly experienced mediator, the court sees why the
Wake County Superior Court vacated the finding that there was "ample evidence of collusion"
15

between the Speaks class counsel and defendant's counsel from Washington, D.C. in negotiating the
proposed Speaks class action settlement. See [D.E. 309-5] 2; cf. [D.E. 252-2].
This court also sees why the Wake County Superior Court vacated its findings that
communications among class counsel during and after the Speaks mediation violated Rule 4.2(a) of
the North Carolina Rules of Professional Conduct. Cf. [D.E. 252-2] ff 115-17, 126. Rule 4.2(a)
forbids a lawyer from directly communicating with an individual that the lawyer "knows to be
represented by another lawyer in the action." N.C. R. Prof. Conduct 4.2(a); Olavmia v. Wake Cty.
Human Servs., 234 N.C. App. 665, 763 S.E.2d 18, 2014 WL 2980253, at *3 (2014) (unpublished
table decision). At all times, defense counsel communicated with the putative class through
Speaks plaintiffs' counsel. See [D.E. 73-23] 5-6. Thus, counsel did not violate Rule 4.2(a).
See N.C. R. Prof. Conduct 4.2(a); cf. 3 Newberg On Class Actions § 9:9 (5th ed. 2019).
Even assuming that Rule 4.2(a) was relevant to counsel's conduct at the Speaks mediation,
this court's local rules mandated the mediation and authorized the communication. Cf. N.C. R. Prof.
Conduct 4.2(a) (stating that court orders can authorize counsel to communicate with represented
persons). Likewise, this court's order granting preHminary approval of the proposed class action
settlement authorized additional communications. See id. Thus, the lawyers in the Speaks
mediation did not violate Rule 4.2(a) by participating in the mediation with Judge Bullock.

D.
As for the Wake County Superior Court's findings concerning the Cooperative' s production

ofdocuments to the Speaks plaintiffs, the Speaks plaintiffs did not receive any additional documents
that were intentionally withheld from the Lewis/Fisher plaintiffs. See [D.E. 315-7]. The production
of documents in both cases was the same. See id.

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E.
As for the Wake County Superior Court's finding that the evidence before it was insufficient

to find that the proposed Speaks settlement was reasonable, fair, and adequate, the Wake County
Superior Court conceded that whether to approve the proposed Speaks settlement raises issues of
federal law within this court's jurisdiction to decide. See [D.E. 252-2] ,r 125. Moreover, the Wake
County Superior Court also knew that the record before this court was not the same record before
the Wake County Superior Court. Nevertheless, the Wake County Superior Court found that the
Speaks case was a "convenient placeholder'' for the Cooperative to engage in "attorney shopping"
in a manner inconsistent with the best interests of the Speaks class members and that it could not
conclude, based on the information that it had, that the terms ofthe proposed Speaks settlement were
fair, reasonable, and adequate to the Lewis/Fisher class members. Id. ,r,r 118, 121-22, 125.
This court agrees with the Wake County Superior Court that settlement approval in this
federal action is a federal matter for this federal court. This court stayed the Speaks action numerous
times. See [D.E. 22, 26-40]. Meanwhile, the Lewis/Fisher action took years to proceed through
the state courts. In December 2016, the Supreme Court of North Carolina affirmed the class
certification in Lewis/Fisher, and then remanded the case. See Fisher, 369N.C. at 204, 794 S.E.2d
at 703. On January 19, 2018, at the Speaks fairness hearing, even though the Lewis/Fisher plaintiffs'
counsel had been litigating Lewis/Fisher for over ten years, the Lewis/Fisher plaintiffs' counsel were
unable to articulate basic aspects of their claims, including what portion of the Cooperative's
reserves were unreasonable, why such amounts were unreasonable, how the Lewis/Fisher class is
legally entitled to any such reserves, and how their legal theory of the case could yield a recovery
greater than the proposed Speaks settlement of approximately $24 million dollars. See Hr'g Tr.
[D.E. 260] 57-67, 75-77; Speaks. F.R.D. at 153-55; cf. Rigby v. Flue-Cured Tobacco Coop.
17

Stabilization Corp.• 327 Ga. App. 29, 42, 755 S.E.2d 915, 926 (2014).

Because the

Lewis/Fisher plaintiffs' counsel were unable to articulate how to win more than $24 million dollars
for the Lewis/Fisher class members despite over ten years of litigation in state court, the Wake
County Superior Court's findings that the Speaks action served as a "convenient placeholder'' for
the Cooperative to engage in "attorney shopping" lack support in the record. Compare Speaks,
F.R.D. at 153-55 with [D.E. 252-2] ff 121-22.
The Wake County Superior Court also found it "difficult to fathom how [it] could find,
without any evidence from the [Cooperative] that a $22,000,000.00 settlement . . . is fair[,]
reasonable[,] and adequate when [it] has previously found there was no evidence to support such a
finding as to a $76,800,00.00 proposed settlement ...." [D.E. 252-2] ,r 119. The Wake County
Superior Court, however, did not address how the litigation risks for the Lewis/Fisher plaintiffs and
the Speaksplaintiffsincreasedsubstantiallysince2005. See Speaks, 324F.R.D. at 142-47, 151-55.
Likewise, the Wake County Superior Court did not analyze the merits of the Speaks plaintiffs'
claims or the Lewis/Fisher plaintiffs' claims in its order of January 17, 2018. Under federal law,
however, ''the most important factor in weighing the substantive reasonableness of a settlement
agreement'' is the strength of the plaintiffs' claims on the merits. Beny v. Schulman, 807 F.3d 600,
614 (4th Cir. 2015); see Flinn v. FMC Corp., 528 F.2d 1169, 1172-73 (4th Cir. 1975).
As for "attorney shopping," no evidence suggests that the Cooperative invited the Speaks

lawsuit. Rather, the Cooperative defended itself in Speaks just as it defended itself in Lewis/Fisher.
The Cooperative does not control who decides to sue it. Once sued, the Cooperative must defend
itself. Moreover, given the ubiquity ofparallel class actions, defense counsel did not act unethically
in zealously defending the Cooperative in each forum in which the Cooperative was sued.

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II.
In sum, this court GRANTS the defendant's motion to clarify the court's order of February

20, 2018, as to the adequacy of class counsel [D.E. 314]. The court FINDS that plaintiffs' counsel
in Speaks and defendant's counsel in this action and Lewis/Fisher did not violate the North Carolina

Rules of Professional Conduct or otherwise engage in unethical conduct.
SO ORDERED. This

1-,

day of March 2020.

11ksc~iVE~Judge
United States District

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