Chen-Oster v. Goldman, Sachs & Co. LLC.

Background

The order addressed communications by class counsel with certain class members after class certification. In an earlier arbitration order, the court held that arbitration provisions in three types of agreements were enforceable for the affected Goldman employees. For employees who had entered into equity agreements, the court held that the arbitration provisions were enforceable under contract law but that Federal Rule of Civil Procedure 23(d) required giving those employees an opportunity to opt out of arbitration because of how their agreement to the provisions had been obtained.

The earlier order directed the parties to develop a notice explaining the employees’ rights. At plaintiffs’ request, the court stayed that process while Judge Analisa Torres considered the parties’ objections to the arbitration order. Before the court-approved notice was issued, class counsel sent an email to an equity-agreement employee and acknowledged sending the same communication to the other affected employees. The email discussed the arbitration order and encouraged recipients to opt out of arbitration.

Dispute over the communications

Goldman reported the email to the court and argued that it contained false or misleading statements about potential remedies, Goldman’s actions, and the arbitration order. The court noted that the parties had not briefed those assertions and that it was making no determination about whether the email was truthful or misleading.

Federal Rule of Civil Procedure 23(d) gives a court authority to manage communications between lawyers and class members. The court explained that restrictions on those communications require a clear record showing a likelihood of abuse and specific findings weighing the need for a restriction against the parties’ rights. The court concluded that the email undermined the court-supervised notice process, although it also stated that class counsel had not violated the express terms of the arbitration order or any other order.

Ruling

Goldman declined to seek a corrective notice and instead asked the court to require class counsel to submit future arbitration-related communications for Goldman’s comment and the court’s approval. Goldman also proposed a script governing class counsel’s responses to questions from the affected employees.

The court found that these measures were not warranted at that time. It stated that the employees were entitled to legal counsel about choosing between remaining obligated to arbitrate and opting out of arbitration to remain in the class action, so long as the information they received was not misleading. The court also relied on its view that the affected employees were well-educated and experienced professionals capable of making an informed decision.

Judge Robert W. Lehrburger therefore declined to require scripting or advance court approval of class counsel’s communications with the equity-agreement employees about arbitration. He warned that, if the court learned that other past or future communications to those employees or other class members contained misleading or incorrect statements, it would take appropriate action.