In re Dennis Greenman Securities Litigation
United States Court of Appeals for the Eleventh Circuit
829 F.2d 1539 (1987)
Dennis Greenman (Greenman), a securities seller, and brokerage firms that employed Greenman (defendants) were sued for fraud in a class-action lawsuit by victims of the alleged fraud. The alleged fraud involved a Ponzi-type scheme that resulted in more than $50 million in losses to the victims and numerous suits against Greenman and the other defendants that alleged violations of federal and state securities laws and sought compensatory and punitive damages. After a year-plus of discovery and the parties’ pursuit of a settlement, the district court consolidated and stayed the individual actions and certified a class action on behalf of all who lost investments in the scheme. The district court certified the class under Federal Rule of Civil Procedure 23(b)(1) and approved the parties’ proposed settlement. In so doing, the district court cited the special circumstances of the cases and its fear that individual actions would expose Greenman and the other defendants to incompatible standards of conduct or result in inconsistent adjudications. A subgroup of the plaintiffs’ class contested the district court’s class certification under Rule 23(b)(3). Such certification creates a mandatory class that absentee members cannot opt out of, and any judgment would be binding on absentee class members. The subgroup argued that the class should instead have been certified under Rule 23(b)(3), which would allow class members to opt out and pursue individual claims.
Rule of Law
Holding and Reasoning (Henley, J.)
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