No. C 90 2090 MHP

NGUYEN

v.

FUNDAMERICA, INC., et al.

No. C 90 2090 MHP.

United States District Court, N.D. California.

Aug. 16, 1990.

Opinion

PATEL, District Judge.

*1 Upon Plaintiffs' Application for provisional certification of the plaintiff class on the claim for equitable and injunctive relief and/or authorizing immediate notice of these proceedings to the potential claimants, and having considered the papers submitted and presentations made at the July 27, 1990; July 31, 1990; August 6, 1990; and August 13, 1990 hearings, this Court makes the following findings of fact and determinations of law:

This action was brought as a class action under Fed.R.Civ.P. 23(a)(1)-(4); (b)(1); and (b)(3), and fulfills the requirements of these rules. The records before the court demonstrate that the proposed class is so numerous that joinder of all of its members is impracticable: these list 95,928 current memberships. Fed.R.Civ.P. 23(a)(1).

The allegations of the Class Action Complaint, and the materials submitted to this Court raise numerous common questions of law and fact. FundAmerica "income positions" and memberships were offered and sold via standardized written promotional and instructional materials, and the "opportunity meetings" at which the oral presentations were made followed set scripts. The tapes and transcripts of these meetings, and the declarations of those attending, demonstrate that these scripts were followed without significant deviation. FundAmerica sold standardized sales aids for use by its participants, and utilized magazines, newsletters, and pre-recorded hotlines to communicate with its participants. Fed.R.Civ.P. 23(a)(2), (b)(3).

On the basis of the allegations of the First Amended Class Action Complaint, her declarations, and the materials submitted to the Court, including the declarations of other participants, the claims of the named plaintiff appear to be typical of the claims of the Class. Plaintiff Lan Nguyen is a FundAmerica Director at the $3,200 level. From the FundAmerica records submitted to this Court, it appears that 19,870 potential class members participate in FundAmerica at this level. The transcripts, scripts and reports of FundAmerica opportunity meetings demonstrate that FundAmerica emphasized investment at the director level.

Participants at all levels (associate, manager, director, executive director, and presidential director) have losses and claims arising from defendants' common course of conduct. FundAmerica's statistics, which indicate a current total of 95,298 current memberships sold by 88,960 current participants (an average of 1.07 per participant) demonstrate mathematically that most participants, like Nguyen, are unable to sell the packages of memberships they purchased from FundAmerica, directly or through other pyramid participants, and have lost money in the scheme. Fed.R.Civ.P. 23(a)(3).

Plaintiff is represented by experienced counsel, and at this time there appears to be no conflict of interest with the Class as a whole. The members of the proposed Class have a common interest in the preservation and equitable distribution of the funds which are the subject of this Order. Fed.R.Civ.P. 23(a)(4).

*2 The federal courts have upheld the predominance of common issues, and lack of disabling conflict in the pyramid scheme context, and have granted certification to comprehensive plaintiff classes in cases arising from similar multi-level pyramid schemes. See Marshall v. Holiday Magic, Inc., 550 F.2d 1173, 1176-77 (9th Cir.1977); Davis v. Avco Financial Services, Inc., 371 F.Supp. 782 (N.D.Ohio 1974), aff'd, 739 F.2d 1057 (6th Cir.1984).

Class certification is superior to other available methods for the fair and efficient adjudication of the participants' claims, and will promote judicial economy and equity for all class members. Fed.R.Civ.P. 23(b)(3).

Any and all claimants to the funds affected by this Order, or litigants who assert equitable and damages claims similar to those of the First Amended Class Action Complaint, should be brought before this Court, and bound by its orders in order to avoid:

"(A) Inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or

"(B) Adjudications with respect to individual members of the class which would as a practical matter be dispositive of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests...."

Fed.R.Civ.P. 23(b)(1)(A), (B).

Accordingly,

IT IS HEREBY ORDERED, ADJUDGED AND DECREED:

1. The following Plaintiff Class is hereby provisionally certified under Fed.R.Civ.P. 23(c)(1), pursuant to Fed.R.Civ.P. 23(a) and (b)(1):

"All persons who purchased one or more memberships in FundAmerica, Inc., between 1986 and the present, who have not received rebates, refunds, or commissions in an amount equal to or exceeding the aggregate purchase price of their personal memberships, memberships purchased from FundAmerica for resale to others, and related sales aids."

2. The Plaintiff Class excludes defendants, any entity in which any of the defendants have a controlling interest, and the legal representatives, heirs, successors, or assigns of any of the defendants, and any and all FundAmerica participants who claim or are proven not to have suffered damages or losses from the FundAmerica program.

3. Under Fed.R.Civ.P. 23(b)(1), this is a "mandatory" class from which members may not elect to exclude themselves ("opt-out").

4. Plaintiff Lan Nguyen is appointed to serve as provisional Class Representative, and the firm of Lieff, Cabraser & Heimann is appointed to serve as Plaintiff Class Counsel. This certification is conditional, and may be altered or amended before the decision on the merits. This Court retains jurisdiction to divide the class into subclasses or to appoint additional class representatives as appropriate, pursuant to Fed.R.Civ.P. 23(c)(4); (d).

5. Plaintiff's counsel shall prepare and submit to this Court, within five (5) days of this Order, a proposed "Notice of Preliminary Injunction and Provisional Class Certification" and "Claim Form" for Court approval and immediate dissemination to the members of the Plaintiff Class under Fed.R.Civ.P. 23(d)(2). Defendants shall provide plaintiffs' counsel, within five (5) days of this Order, with the names and addresses of all known FundAmerica participants (including all members and all "independent representatives" at the associate, manager, director, executive director, and presidential director levels) so that individual notice may be sent to all potential class members.

*3 IT IS SO ORDERED.