Class Certification of Zeek’s net-winner thieves granted
As part of our continued coverage of Zeek Reward’s top thieves being steamrolled in court and having their legal arguments demolished, today we bring you news that the Receiver’s request for Class Certification has been granted.
Before we get into what that means, let’s take a look at the request itself.
At the heart of the matter is the allegation from the Receiver that
because ZeekRewards’ Net Winners “won” money in an unlawful combined Ponzi and pyramid scheme, the Net Winners are not permitted to keep their winnings and must return the fraudulently transferred winnings to the Receiver for distribution to ZeekRewards’ victims.
Naturally the net-winners, those who profited the most from the Ponzi scheme, disagree. And to that end we’ve seen a mountain of litigation filed and all sorts of attempts to delay proceedings to that effect.
Regardless, we’re slowly getting there and this request for Class Certification brings us one step closer to seeing net-winners forced to pay back the funds they stole.
The pros of Class Certification being awarded are that it’s much simpler than individually litigating against the 9400 investors in the US who stole more than $1000 from Zeek’s victims.
As per the Federal Rules of Civil Procedure, the 9400 net-winner investors in Zeek (the clawback litigation ignores those who made less than $1000), ‘meets the numerosity requirement‘ required for Class Certification.
Arguments have been raised against Class Certification by Zeek’s top net-winners however.
Zeek’s net-winners argue a lack of commonality between themselves and the rest of Zeek’s net-winners, and also that they ‘simply cannot afford to represent the Net Winner Class‘.
The issues at play here relate to the designation of Zeek’s top net-winners as Class Representatives, representing the rest of the 9400 net-winner defendants in the clawback litigation.
Primary factors that have to be met are that there is a commonality between the Class Representatives and the rest of the net-winners, both in situation and in their ultimate objectives. There also can be no conflict of interest between the Representatives and the rest of the net-winner class.
On the broad topic of commonality, the court found that:
The “commonality” factor examines whether there are “questions of law or fact common to the class.”
Here, the common questions are whether ZeekRewards operated as a Ponzi and/or pyramid scheme and whether net winnings received by the Defendants should be returned to the Receiver.
The proposed class members in this action are likewise linked by a common set of facts, which includes whether ZeeksRewards’ operation was a Ponzi and/or pyramid scheme.
All class members had or controlled usernames and accounts with ZeekRewards through which they received funds from RVG. Further, each class member received more money from RVG than they paid into RVG (their “net winnings”) during the course of their participation as affiliates in the ZeekRewards program.
There is also a common question of law, that is: whether the payments from ZeekRewards to class members are fraudulent transfers that must be disgorged and repaid.
Basically, all net-winners received funds from Zeek – and based on whether or not Zeek Rewards was a Ponzi and/or pyramid scheme, they all now face the common prospect of having to return those funds.
The argument against that?
Despite these undisputed key common issues of law and fact, Defendants argue that the commonality requirement is not met because there may be differences in the Defendants’ relationships with RVG insiders, differing counterclaims,2 differing defenses such as reliance on counsel’s advice, potential third-party claims, and other issues related to the details of each Defendant’s participation in ZeekRewards.
Get your popcorn ready…
Any potential dissimilarities among the members of the proposed class do not impair the ability to reach a common resolution to the core issues of law and fact in this case.
Moreover, Defendants’ claim that individual circumstances impact the commonality requirement ignore the nature of this fraudulent transfer case, which simply looks at whether there was a fraudulent transfer to all the Net Winners that must be repaid, without regard to the individual circumstances of participation in the scheme.
How, why or who you spoke to during the course of stealing funds from Zeek victims doesn’t matter. That Zeek’s top net-winners and the rest of the net-winner class stole the funds is grounds for commonality enough.
With the issue of commonality resolved, next up was establishing whether there any insurmountable conflict of interest arose from naming the top net-winners as Class Representatives.
The typicality requirement addresses whether the “the claims or defenses of the representative parties are typical of the claims or defenses of the class.”
Obviously if the top net-winners were not deemed “typical” of the 9400 lesser net-winners, than certifying them Class Representatives is folly.
The Receiver has proposed that one or more of the following named Defendants serve as Class Representatives: Trudy Gilmond and Trudy Gilmond, LLC; Jerry Napier; Darren Miller; Rhonda Gates; Innovation Marketing, LLC; Aaron Andrews; Shara Andrews; Global Internet Formula, Inc.; T. LeMont Silver; Karen Silver; and Durant Brockett.
The typicality requirement does not mandate that the defenses of the representative parties and the class be completely identical or perfectly coextensive.
Rather, it is sufficient if the defenses are substantially similar and “there is a nexus between class representatives/claims or defenses and common questions of fact or law which unite the class.”
So, are the defenses of the top net-winners and rest of the net-winner class likely to be substantially similar?
Here, the proposed Class Representatives and the class each participated in the same event and course of conduct that has given rise to the Defendant class; that is, they all participated in and received at least $1000 in profits from the ZeekRewards scheme.
Because the Class Representatives participated in the same ZeekRewards scheme, they inevitably share the same defenses against liability for repayment of the alleged fraudulent transfers made to the class, which does not depend on the personal circumstances of particular affiliates.
You bet. All net-winners named in clawback litigation thus far stole $1000 or more from Zeek Rewards’ victims. That makes the top net-winners defenses equally applicable to each of the lesser 9400 net-winner defendants.
Finally the last issue is whether or not the Class Representatives and their attorneys will be able to ‘fairly and adequately represent the interests of the defendant class‘.
In determining whether a named representative in a class action is “a fair and adequate representative,” some courts have applied a two-pronged test:
1) the representative must be able to conduct the litigation; and 2) the representative’s interests must not be
antagonistic to those of the class members.
Courts also examine the extent of the named representatives’ financial interest in the class action.
This one was easy to determine, with the court summing up its findings in a few short paragraphs:
Here, the proposed Class Representatives’ interests are not antagonistic to, but rather aligned with, the interests of the unnamed class members because they share the common objective to defend against having to return funds received from ZeekRewards as demanded by the Receiver.
Thus, there is no conflict which would defeat adequacy of representation.
Further, the named Class Representatives were among the largest Net Winners of the ZeekRewards scheme. Each received over $900,000 from RVG (either individually or together with another family member or through their shell corporation).
The proposed Class Representatives are not likely to abandon or return these substantial sums without obtaining experienced counsel and mounting a vigorous defense.
Already, the proposed Class Representatives have retained competent counsel who have filed extensive answers and motions to dismiss.
Who better to raise every conceivable argument against paying back stolen Ponzi funds than those who stole the most?
Finally, it is undisputed that counsel retained by the proposed Class Representatives are experienced and qualified attorneys, fully capable of protecting the interests of their clients and consequently the class.
Perhaps the most amusing defense to be trotted out by Zeek’s top pimps, was the claim that they simple couldn’t afford to represent everyone.
This too was addressed in the courts findings…
The Named Defendants argue that they simply cannot afford to represent the Net Winner Class.
However, their protestations of poverty ring hollow in light of the fact that together they won over $11 million in profits from ZeekRewards.
the Court finds that Defendants and their counsel can and will adequately represent the class and there is no basis to deny class certification over the issue of what amount of truly necessary class legal expenses (as distinguished from the Defendants’ own legal costs) are paid by the Receivership.
That any of the victim’s funds should be put towards funding representation of Zeek’s net-winners is a bit of a farce, but if it’s not too much and it means this is done with all the quicker, so be it I guess.
Additionally concluding that failure to establish Class Certification might result in conflicting rulings across 9400 individual lawsuits (creating a legal mess), the court ruled:
A Defendant class action is fair to the Defendants, particularly relatively small Net Winners.
The efficiency of one action in which all parties can argue their case and assert their rights will benefit both the Receiver and small winners.
While the Court is mindful of due process concerns as well as other problems specific to defendant class actions, the Court is firmly convinced a class action is the only means to reasonably and efficiently resolve the Receiver’s claims against 9,400 Net Winners.
It is therefore ordered that the Receiver’s Motion for Class Certification is hereby granted.
So with that now out of the way, it’s expected that the Receivership will at some point in the near future file Class Certification litigation against all 9400 net-winners. This includes the top net-winners who have not already had default judgment rendered against them.
After some more pro-Ponzi legal arguments are destroyed in court, I predict that ultimately we’re going to see all 9400 net-winners pay back a sizable portion of the funds they stole.
Bring it on…
Footnote: Our thanks to Don@ASDUpdates for providing a copy of Judge Mullen’s February 10th order, granting Class Certification.