Sunday, August 29, 2021

FYI: 8th Cir Affirms Denial of Class Cert in UDAP Case

The U.S. Court of Appeals for the Eighth Circuit recently affirmed a trial court's denial of class certification, concluding that:


(1) the plaintiffs' nationwide class action complaint alleged violations of the Minnesota Consumer Fraud Act, and thus rebuttal evidence was permitted;

(2) the defendant company had evidence challenging the extent to which each plaintiff allegedly relied on the alleged omissions; and

(3) individualized findings on reliance were therefore required, which would likely lead to multiple mini-trials within the class action.


The Eighth Circuit also explained that, because the class had not been defined in such a way that anyone within it would have standing, the class could not be certified.


A copy of the opinion is available at:  Link to Opinion


The plaintiffs filed a putative class action alleging that the defendant company failed to disclose heat defects in the all-terrain vehicles ("ATVs") sold by the company and that this artificially inflated the price of their ATVs.


Six plaintiffs in six states sought to certify a nationwide class under the Minnesota Consumer Fraud Act ("MCFA"). Alternatively, they asked the trial court to certify six statewide classes for ATV owners in California, Florida, Minnesota, Missouri, New York, and North Carolina, under the laws of each state.


The trial court denied class certification because it determined that individualized questions predominated, a class action was not a superior method for litigating, and the putative classes included members who lacked standing. The plaintiffs timely appealed.


In In re St. Jude Medical, Inc., the Eighth Circuit held that a trial court abused its discretion by certifying a class of plaintiffs that alleged material misrepresentations concerning heart valve replacements in violation of the MCFA. 522 F.3d 836, 841 (8th Cir. 2008). In that cases, the Court noted that fraud cases are ill-suited for class actions because they require individualized findings on whether the plaintiffs actually relied on the alleged misrepresentation. Id. at 838. The defendants there put on evidence showing that the plaintiffs did not remember whether their doctors mentioned the unique qualities of the valve. Id. at 839. Considering this rebuttal evidence, the Court held that individual issues predominated over common questions. Id. at 841.


The Eighth Circuit found the same reasoning applied in this case.


The nationwide class action complaint at issue here alleged violations of the MCFA, and the Court held that rebuttal evidence was permitted. See St. Jude, 522 F.3d at 840. The defendant company in turn had evidence challenging how much each plaintiff relied on the alleged omissions, which the Eighth Circuit concluded would require individualized findings on reliance and was likely to make for multiple mini-trials within the class action.


Because these individual fact issues would predominate, the Eighth Circuit held that the trial court was within its discretion to deny the plaintiffs' motion for class certification on this basis.


The plaintiffs also argued that the trial court should have certified six state-wide classes for the states of California, Florida, Minnesota, Missouri, New York, and North Carolina. However, the Eighth Circuit determined that at least two of these proposed classes — Minnesota and North Carolina — required individualized fact findings on the issue of reliance. See St. Jude, 522 F.3d at 838–39; see also Arnesen v. Rivers Edge Golf Club & Plantation, Inc., 781 S.E.2d 1, 7 (N.C. 2015). Therefore, the Eighth Circuit agreed with the trial court that those two putative statewide classes had individual questions that predominated.


The plaintiffs next argued that even if classes could not be certified for Minnesota and North Carolina, the trial court could have certified class actions for the remaining four states.


Under Rule 23(b)(3), even if common questions predominate, a class can only be certified if the trial court finds "that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy."


The Eighth Circuit ruled that the trial court did not abuse its discretion by denying class certification for superiority reasons.


The trial court had found that the class action was not superior because the underlying issues in the case "would present a significant risk of jury confusion and would create enormous challenges to trial management." This was based on the observation that the proposed classes would require application of the laws of four different states to forty-three different vehicle configurations, including at least four different engines, with changing exhaust standards through the years, and various attempts by the company to remedy the problems.


In the Eighth Circuit's view, this scenario presented monumental manageability concerns, a certification factor under Rule 23(b)(3). The putative classes simply sought to consolidate too many claims with too many variables. Accordingly, the Court concluded that the record supported the trial court's superseding concern that the litigation would be unmanageable. See Windham v. Am. Brands, Inc., 565 F.2d 59, 70–72 (4th Cir. 1977).


Furthermore, the Eighth Circuit noted that "[a]lthough federal courts do not require that each member of a class submit evidence of personal standing, a class cannot be certified if it contains members who lack standing." Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1034 (8th Cir. 2010).


To satisfy Article III standing, a plaintiff must show (1) an injury in fact; (2) a causal connection between the injury and conduct complained of; and (3) the likelihood that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992) (citation omitted). "It is well established that purchasers of an allegedly defective product have no legally recognizable claim where the alleged defect has not manifested itself in the product they own." Briehl v. Gen. Motors Corp., 172 F.3d 623, 628 (8th Cir. 1999) (citation omitted).


The Eighth Circuit concluded that the plaintiffs did not define their classes to make sure all proposed members had standing. Although the plaintiffs sought to certify classes for everyone who bought the ATV models in question, evidence at the class certification stage showed that not all of the ATVs manifested the alleged heat defect.


Indeed, the plaintiffs' own briefing before the trial court acknowledged only that "the high [exhaust gas temperatures] and low clearance create melt risks to the ATV and burn risks to the rider." "It is not enough to allege that a product line contains a defect or that a product is at risk for manifesting this defect; rather, the plaintiffs must allege that their product actually exhibited the alleged defect." O'Neil v. Simplicity, Inc., 574 F.3d 501, 503 (8th Cir. 2009).


Thus, because the classes had not been "defined in such a way that anyone within [them] would have standing," the Eighth Circuit held that the classes could not be certified. Avritt, 615 F.3d at 1034.


Accordingly, the Eighth Circuit affirmed the trial court's denial of the plaintiffs' motion for class certification.




Ralph T. Wutscher
Maurice Wutscher LLP
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