Class Dismissed: Fourth Circuit Affirms Denial of Class Proofs of Claim; Leaves Open Possibility for Similar Claims in the Future

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On February 2, 2010, the United States Court of Appeals for the Fourth Circuit held that certain class action claimants in the Circuit City bankruptcy cases were authorized to file class proofs of claim.  However, the Fourth Circuit further held that in this case, the class action process could not proceed because the bankruptcy claims process provided certain procedural advantages over the class process.  Gentry v. Siegel, — F.3d —-, 2012 WL 310870 (4th Cir. 2012).  Although the decision theoretically permits class actions in bankruptcy cases within the Fourth Circuit, the decision suggests that Fourth Circuit bankruptcy courts will seldom allow class actions to proceed concurrent with the bankruptcy process.

The claimants sought recoveries for unpaid overtime wages, and commenced class action suits against Circuit City prior to the bankruptcy.  Following the commencement of Circuit City’s bankruptcy cases in November 2008, the claimants filed proofs of claim on behalf of their respective classes and, subsequent to the claims bar date, filed a joint motion to certify their claims as class actions.

On April 15, 2010, the United State Bankruptcy Court for the Eastern District of Virginia held that (i) the claimants were not permitted to file class proofs of claim, (ii) the claimants’ motion was untimely, (iii) the claims process was superior to the class action process, and (iv) Circuit City had provided potential class members with adequate notice of the claims process and bar date.  On appeal, the United States District Court for the Eastern District of Virginia affirmed the bankruptcy court’s ruling on the basis that the bankruptcy court did not abuse its discretion in holding that the claims process was superior to the class action process and that Circuit City had provided sufficient notice to potential similarly situated claimants.

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Published In: Bankruptcy Updates, Civil Procedure Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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