ARTHUR GONZALEZ, Bankruptcy Judge
On January 21, 2003, Lewis Hunt Irving (the "Claimant") filed a claim purporting to be the class representative of similarly situated plaintiffs. The Claimant alleges that WorldCom, Inc. and certain of its subsidiaries, as debtors and debtors in possession (collectively, the "Debtors") installed fiber optic cables within railroad rights-of-way with the consent of the railroads, but without the consent of landowners, such as the Claimant, who own property adjacent to the railroad rights-of-way. This matter arises from the Claimant's request for class claim certification.
I. Jurisdiction and Venue
The Court has subject matter jurisdiction over this proceeding pursuant to sections 1334(b) and 157(a) of title 28 of the United States Code. This matter is a core proceeding within the meaning of section 157(b) of title 28 of the United States Code. Venue is properly before this Court, pursuant to sections 1408 and 1409 of title 28 of the United States Code.
II. Background
A. The Debtors
The Debtors provide a broad range of communication services in over 200 countries on six continents. Through its core communications service business, which includes voice, data, internet and international services, the Debtors carry more data over its networks than any other entity. The Debtors were the second largest carrier of consumer and small business long distance telecommunications services in the United States, and provided a broad range of retail and wholesale communications services.
On July 21, 2002 (the "Commencement Date") and November 8, 2002, the Debtors commenced cases under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). By orders dated July 22, 2002 and November 12, 2002, the Debtors' chapter 11 cases were consolidated for procedural purposes only and were jointly administered. The Debtors continued to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On July 29, 2002, the United States Trustee for the Southern District of New York (the "U.S. Trustee") appointed the committee of unsecured creditors (the "Committee").
On October 29, 2002, this Court entered an order (the "Bar Date Order") which established January 23, 2003 as the bar date (the "Bar Date") for filing proofs of claim in these cases. Pursuant to the terms of the Bar Date Order, on or about November 22, 2002, the Debtors mailed notice of the Bar Date to an excess of over 1.2 million creditors and potential claimants. A plan of reorganization, pursuant to the Bankruptcy Code, was confirmed on October 31, 2003 and became effective on April 20, 2004 (the "Plan").
B. The Claimant's Claim
The Claimant's case is one of approximately 75 similar class actions pending against the Debtors. In the fall of 2001, the Debtor entered into a settlement agreement with a certain group of plaintiffs' lawyers whereby all similar claims against it nationwide would be certified and settled in one nationwide class action, of which the putative class discussed herein would have been included. Ultimately, the nationwide settlement class was not certified; the Seventh Circuit, in Smith v. Sprint, 387 F.3d 612, 615 (7th Cir., 2004) (the " Smith Decision"), ruled that the settlement class representatives did not adequately represent members of the class.
The Claimant initially asserted his class action complaint in the Court of Common Pleas, Philadelphia County, Pennsylvania in May 1999. In that complaint, the Claimant sought just compensation for unlawful trespass, occupation or taking of land in the state of Pennsylvania, or in the alternative, an order ejecting the Debtors from the property. The complaint alleged that the Debtors laid fiber optics systems cables on railroad rights-of-way with the permission of the railroads but without the permission of the underlying property owners. The class consists of thousands of property owners who own property adjoining the rights-of-way. That action was stayed when the Debtors filed their petition. At the time the action was stayed, the Pennsylvania court had not ruled on the Claimant's motion for class certification or issued any decision addressing the merits of the litigation.
Thereafter, on January 21, 2003, the Claimant filed Claim Number 015979, as the representative of a class of similarly situated individuals and entities. The Debtors objected to the Claimant's class proof of claim and this Court held a hearing on the matter on February 10, 2004.
This memorandum decision and order addresses the Debtors' objection to the class certification of the Claimant's putative class.
Although not discussed in this memorandum decision and order, the Debtors have reserved the right to submit evidence that the putative class members have only suffered nominal damages.
III. Discussion
A. Class Certification
The Debtors' first objection is that the Claimant lacks any legal basis to assert a claim on behalf of any person other than himself because there was no class certified nor any agent for the class appointed before the Commencement Date. The Claimant correctly points out that the process by which a bankruptcy court may certify a class under FED. R. CIV. P. 23 ("Rule 23") is not set out in the Bankruptcy Code or Rules. The court in In re Charter Co., 876 F.2d 864 (11th Cir. 1989) ruled "absent an adversary proceeding, the first opportunity a claimant has to move under Bankruptcy Rule 9014, to request application of Bankruptcy Rule 7023, occurs when an objection is made to a proof of claim. Prior to that time, invocation of Rule 23 procedures would not be ripe, because there is neither an adversary proceeding nor a contested matter." Id. at 874; see In re Chateaugay Corp., 104 B.R. 626, 634 (S.D.N.Y. 1989) (stating "proofs of claim filed on behalf of a class may be filed as of right and in such circumstances the bankruptcy court must exercise its discretion, pursuant to rule 9014 to apply or not apply Rule 7023, once an objection has been made to those claims."); In re Woodward Lothrop Holdings, Inc., 205 B.R. 365, 369 (Bankr. S.D.N.Y. 1997) (stating "The claim cannot be allowed as a class claim until the bankruptcy court directs that Rule 23 apply. It can only make this direction in a pending contested matter, which the mere filing of the claim does not initiate. In the absence of an objection, however, the proof of claim is deemed allowed."). The Claimant filed class proofs of claim before the Bar Date consistent with the requirements set forth in the Bar Date Order, and therefore, their claims are not time barred. The Court now turns to whether the class is certifiable under Rule 23.
Arguably, it would appear that Mr. Irving could have sought declaratory relief in an adversary proceeding, however, the Claimant's failure to do so does not prohibit the putative class certification.
Rule 23 governs class actions and is incorporated by bankruptcy courts pursuant to FED. R. BANKR. P. 7023. Rule 23(a) requires
One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claim or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Id.
In addition to the four prerequisites listed above, one of three requirements outlined in Rule 23(b) must be met as well. The Claimant contends that the putative class claim satisfies Rule 23(b)(2) and (3). The requirement set forth in Rule 23(b)(2) states "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole." Id. The requirement set forth in Rule 23(b)(3) states "the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Id.
The Debtors do not dispute that the numerosity requirement has been established. The Debtors raise objections as to (1) whether the putative class representative adequately represents the class; (2) that the Claimant does not meet the commonality and typicality requirements of Rule 23(a); and (3) that the Claimant fails to meet the requirements set forth in Rule 23(b)(2) and (3) as outlined above.
The Debtors argue that each member of the putative class's case turns on individual facts, such as the nuances of century old deeds, the intricacies of each class member's chain of title, when each class member discovered the cable installation, and the variations in the value of each class member's property. Each putative class member must prove that he owns a fee interest in the right-of-way because there is no trespass if the railroad owns a fee interest in the right-of-way. Further, each deed must be interpreted on an individual basis because the rights-of-way were granted a century ago and such deeds were not standardized; therefore, the conveyances made to the railroads are not identical in each conveyance. Finally, the Debtors note that the Court must view the chain of ownership from the original landowner who granted the conveyance through the current adjacent landowner to see if the railroad's interest in the right-of-way changed over time. The Claimant argues that because numerous fiber optic right-of-way cases have been certified, the Court should certify the putative class here.
At the February 10, 2004 hearing, the Claimant referenced Smith v. Sprint, Case No. 99-C-3844 (Anderson, J.) which at the time was on appeal in the Seventh Circuit as being the model for his litigation plan. Hrg. Transcr. 58:2 (February 10, 2004). This case has since been decided in the Smith Decision which overruled the district court's certification because the class representatives failed to adequately represent the class. Further, the Claimant, himself, noted that manageability is not considered in approving a settlement class but is considered in the certification of a trial class. As will be discussed below, the claims in this case must be examined on an individual basis, which leads to an unmanageable result, and therefore, the putative class cannot be certified for trial.
Commonality is established if the putative class members' grievances share common questions of law or fact. In re Deutsche Telekom, 229 F. Supp. 2d 277, 280 (S.D.N.Y. 2002). Typicality is established when the plaintiff shows "each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability." Id. (quoting Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997)). Although the commonality and typicality requirements do not require all class members to make identical claims and arguments; it only requires that common issues of fact or law affect all class members. Id. (quoting Trief v. Dun Bradstreet Corp., 144 F.R.D. 193, 198 (S.D.N.Y., 1992); Cooper v. Southern Co., 2004 U.S. App. LEXIS 23495, *34 (11th Cir., November 10, 2004)). Although commonality and typicality are often examined in conjunction with one another, as in this case and those discussed above, they remain two separate and distinct requirements under Rule 23.
Class certification was also denied in Chambers v. MCI WorldCom Network Servs., Inc., No. 00-C-348-C (W.D. Wisc. March 2, 2001), appeal denied, (7th Cir. April 3, 2001). In that case, Everett E. Chambers, Joanne Chambers, Cornelius Schleicher and Ray Vinney moved for class certification of a similar Wisconsin state-wide class. The United States District Court for the Western District of Wisconsin denied the class certification motion. The court in Chambers ruled that the plaintiffs failed to meet the typicality requirements of Rule 23(a), which the court stated required a more stringent analysis then commonality. Id. at 17. The court held that the plaintiffs had minimized the large number of variant deeds that the railroad held on the property; each plaintiff would have to show their underlying property interest in the right-of-way, and further, whether each individual landowner consented to the installation of fiber optic cables on their property. Id. at 18-19. The Court agrees with this analysis.
The court in the Smith Decision stated that "[c]onfronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems for the proposal is that there be no trial." Id. at 614 (quoting Achem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997)). Further, the court in the Smith Decision noted that trial class certification was denied in the Isaacs v. Sprint Corp., 261 F.3d 679 (7th Cir. 2001) which had a virtually identical class as the putative settlement class presented in Smith. The Smith Decision, 387 F.3d at 613. Because the Claimant is asking this Court to certify a class for trial, it is necessary to account for the case management problems that could result from such certification.
With regard to the case management problems, this Court has already discussed above the intricacies involved in this class certification. There are thousands of members to the putative class and each chain of title and grant of the right-of-way must be followed individually from its inception. The Court cannot possibly take on such a task. As the court in Isaacs noted, "[t]his is a nightmare of a class action." Isaacs at 682. This Court agrees with this observation. To certify this class would lead to an unmanageable result, and therefore, the putative class cannot be certified.
The Claimant maintains that the Debtors' willingness to enter into a nationwide class settlement is evidence that class certification is appropriate for trial. In the settlement proceeding, the defendants, including the Debtors, were willing to pay all parties with land adjoining a railroad right-of-way a stipulated amount regardless of the title held by the landowner or the railroad, subject to the court's approval. This was meant to expedite and eliminate costly and extensive litigation. The Debtors were not concerned with the nuances of each claim; rather, they would have approved recovery for many dissimilarly situated plaintiffs. Regardless of what the Debtors and other defendants had wanted to do in the settlement, ultimately, as discussed above, such certification has been denied. Therefore, such willingness to enter into a settlement is not proof by itself that the putative class should be certified.
The Debtors further contend that the Claimants are not adequate representatives of the class. The Chambers court ruled:
Plaintiffs are not adequate representatives of the proposed class because: (1) their interests in the right-of-way differ from those of absent class members who obtained their property through different instruments of conveyance; (2) plaintiffs (who had notice of installation) are motivated to assert defenses that do not apply to absent class members who did have notice; and (3) plaintiffs have no incentive to assert lack of notice and acquiescence as defenses to the statute of limitations for absent class members.
Id. at 20-21.
The concerns raised by the Chambers court are present in this case, and therefore, the Court agrees with the analysis and finds that the Claimant does not adequately represent the class. The putative class is not certifiable because too many differences exist between the class members, and individual questions of fact predominate over this case. The thousands of claims which rely on particularized facts and circumstances cannot be framed to meet the requirements of Rule 23(a) in order to be certified as a class.
Furthermore, Rule 23 requires that one of the three 23(b) requirements be met. The Debtors assert that the Claimants have failed to establish that any of the three apply to this class certification, and the Court agrees with this conclusion. Rule 23(b)(2) requires that "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole." Id. The Claimant has not provided any evidence that Rule 23(b)(2) applies here, and therefore, such assertion is rejected by the Court.
Rule 23(b)(3) requires that there be "questions of law or fact common to the members of the class that predominate over any questions affecting only individual members." Id. The Debtors correctly point out that the individual questions of fact predominate over common questions. In order to render a decision, the Court must examine on an individual basis each title document given to the railroad, the title documents of the adjacent landowners of both the present landowners and the owners when the cable was installed, the value of such title to each landholder, and the damage suffered by each landowner along with a litany of other facts that must be considered. The Claimant has not provided adequate proof that they have satisfied Rule 23(b)(3). Therefore, the Claimant has failed to meet any of the requirements set out by Rule 23(b).
B. The Statute of Limitations and Laches
The Debtors argue that the entirety of the Claimant's claims should be disallowed due to the statutes of limitations and laches. In light of this Court's denial of the class certification it is unclear as to whether it is necessary to rule on either of these issues. The Court declines to rule on these issues at this time and will schedule a status conference on February 8, 2005 at 10:00 a.m. to discuss any remaining issues, including the aforementioned issues, with regard to the Claimant's motion.
C. The Automatic Stay
The Claimant argues, in the alternative, if class certification is not granted then the Court should lift the automatic stay so that they may pursue remedies in other courts (because a plan has been confirmed the Court views this as a request to lift the injunction provided for in the Plan and, therefore, will refer to this request accordingly by addressing the injunction). The Court rejects this argument. The Claimants have failed to establish that adjudication of the asserted claims should occur in any forum other than this Court. Therefore, this Court finds there is no basis to grant the Claimants relief that would allow them to adjudicate their claims in another forum.
The Debtors' Plan of Reorganization states "Except as expressly provided in the Plan, the Confirmation Order, or a separate order of the Bankruptcy Court, all entities who have held, hold, or may hold Claims against or Equity Interests in any or all of the Debtors and other parties in interest . . . are permanently enjoined, on and after the Effective Date, from (i) commencing or continuing in any manner any action or other proceeding of any kind against the Debtors or Reorganized Debtors with respect to any such Claim or Interest. . . ." Id., at ¶ 10.04.
IV. Conclusion
Based on the foregoing, the Court concludes that the Claimant has not met the burdens imposed by Rule 23, and therefore, the putative class will not be certified. The Claimant's putative class, along with other variations of the putative class, have all been denied class certification, in both settlement and trial contexts, and no reason exists to abandon these prior rulings.
Therefore, for the reasons set forth herein it is hereby
ORDERED, that the Debtors' Objection to Class Proofs of Claim Filed by the Claimant is SUSTAINED; it is further,
ORDERED, that the Claimant's Request to File Class Proofs of Claim is DENIED; it is further,
ORDERED, that the Claimant's request to assert his claims in another forum is DENIED; it is further,
ORDERED, that a status conference will be held on February 8, 2005 at 10:00 am regarding this matter.