By Gerald L. Maatman, Jr., Mike Rosenblatt, and Ryan Garippo
Duane Morris Takeaways: On August 10, 2026, in Kalman v. Sevigny, et al., No. 26-CV-00619 (D.N.J. Aug. 10, 2026), Judge Christine P. O’Hearn ruled that Attorney Matthew Kalman could not serve simultaneously as class representative and counsel prosecuting the case on behalf of the class. The decision serves as a helpful reminder for any company facing a class action to review opposing counsel and class representatives for conflicts of interest.
Conflicts of interest can be an early death knell for a class action suit, allowing companies to dispose of class actions without even addressing the case’s merits.
Case Background
As both class representative and class counsel, Matthew Kalnan brought suit against a myriad of financial services companies and their executives, alleging that he was defrauded in a systematic scheme to solicit investments from retirees and conservative investors. According to Kalnan, the scheme started in 2015 when he hired Aaron Sevigny of Acadia to invest his retirement funds. Kalnan claims that he entrusted Sevigny and Acadia to invest conservatively on his behalf.
But according to Kalnan, the investments recommended by Acadia were anything but risk averse. He claimed instead that his funds were invested in, for example (1) a private placement later charged by the SEC as a “Ponzi-like scheme”; (2) a conservation easement, which served as “abusive tax shelters”; and (3) a collateral debt obligation vehicle with “limited repurchases, … suspended offerings, and illiquidity risks.” Kalnan further alleged that Sevigny and Acadia failed to provide accountings or disclose risks of the investments, and as losses mounted in November 2024, Sevigny and Acadia stopped communicating with Kalnan altogether. Kalnan estimates he lost around $2 million in the scheme.
Kalnan brought the suit as a class action, however, rather than as a claim solely for his own damages. Kalnan’s class definition included “[a]ll persons who invested funds with or through Defendants in unsuitable alternative investments.”
Kalnan filed his complaint on January 20, 2026, and filed a First Amended Complaint on March 9, 2026. In both complaints, he served as both class counsel and class representative. Kalnan brought claims for racketeering, violations of federal security law, violations of New Jersey consumer fraud law, fraud, and other common law allegations. Defendants filed a motion to disqualify Kalnan from serving as both counsel and class representative on May 6, 2026.
The District Court’s Ruling
In a 3-page opinion, Judge O’Hearn struck all class allegations in the instant case and conditioned Kalnan’s refiling of class claims “only if alternative counsel enters an appearance and Kalnan withdraws his appearance in its entirety.” Op. at 3 (emphasis in original). The ruling also permits Kalnan to continue litigating the instant case as an individual and representing himself pro se.
Judge O’Hearn based her ruling on the Third Circuit’s holding in Kramer v. Science Control Corp., 534 F.2d 1085 (3d Cir. 1976). Kramer held that where a class action may result in an award of attorneys’ fees, the plaintiff class representative may not also serve as class counsel. The Third Circuit based its decision on “the possible conflict of interest between the class member plaintiff qua plaintiff and the class member qua counsel, under circumstances in which an equitable fund may be created from which an attorneys’ fee may be awarded.” Id. at 1090.
O’Hearn rejected Kalnan’s arguments that the motion to disqualify him as counsel was premature. Kalnan argued that procedurally, disqualification should wait until class certification or discovery began. The decision rejected this argument, stressing that “[n]o discovery could alter those facts or the conclusion that such representation is improper.” Op. at 2.
Implications for Companies
The Kalnan decision serves as a critical reminder to companies and defense counsel to search for and raise potential conflicts of interest between class and counsel as early into litigation as possible. Courts take great care in ensuring that class counsel’s interests in recovering attorneys’ fees does not interfere with representation of absent class members. This care typically arises later in the case when the parties move towards settlement and the court must serve as a steward of the class.
But conflicts of interest can arise at any time, and identifying a conflict of interest between class and counsel can be an efficient way to dispose of a class action in its early stages. Here, defendants were able to effectively dismiss all class claims with a single, 3-page motion, filed just two months after the First Amended Complaint. While Kalnan can continue to litigate his own case, the elimination of class claims substantially reduces defendants’ exposure. Companies should take note of this decision and be on the lookout for similar opportunities in their own class action defenses.