The U.S. Court of Appeals for the Third Circuit recently affirmed a district court’s denial of class certification on several consumer fraud claims asserted by putative class plaintiffs.
Among its reasoning, the Third Circuit held that the laws of the individual plaintiffs’ home state would apply, and that application of such laws to each plaintiff was impractical for class certification.
The Court also affirmed the denial of class certification relating to claims under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”), because, although the proposed class included those who had received written communications from a debt collector, the representative plaintiff did not receive any communication, and was therefore inadequate as a class representative.
A copy of the opinion is available at: http://www.gpo.gov/fdsys/pkg/USCOURTS-ca3-13-04329/pdf/USCOURTS-ca3-13-04329-0.pdf.
Appellants (“Debtors”) filed a class action lawsuit, wherein they alleged that the appellees, which consisted of a nationwide provider of diagnostic and clinical testing, as well as multiple collection agencies (for convenience, “Appellees”), supposedly overbilled for certain diagnostic services. Specifically, the Debtors alleged that their insurance providers notified Appellees of how much Debtors were responsible for paying, and Appellees then allegedly billed Debtors for an amount greater than the insurance providers authorized.
Regarding their overbilling allegations, Debtors sought to certify several classes, two of which were considered at length in this appeal.
First, Debtors proposed a class of all persons who were billed by Appellees and who paid an amount in excess of that stated on the notices from Debtors’ insurance providers, sent prior to the date of the bill (“Overbilling Class”). Although multiple causes of action were asserted against this class, Debtors urged state law consumer fraud and unjust enrichment claims.
Regarding the state consumer fraud claim, following a choice of law analysis, the district court determined that the law of the class members’ home states would apply. Concluding that so many different fraud statutes would be unwieldy and inappropriate for class treatment at trial, the trial court denied certification of the Overbilling Class as to the state consumer fraud claims.
Likewise, regarding the unjust enrichment claims, the district court also denied certification of the Overbilling Class. The lower court found that, because there were numerous explanations for overbilling, evidence would be highly individualized and no common issue of fact would predominate between class members. Further, the lower court determined that, because the class definition implicitly included a requirement that such billing was “wrongful,” the class was not reasonably ascertainable.
Second, Debtors proposed a class of all persons who received written demands from the debt collector defendants (“FDCPA Class”). However, again, the district court denied certification. On this issue, the court found that the proposed representative plaintiff had never received a written demand from any of the defendant debt collectors.
Following these rulings, and the district court’s granting of summary judgment in favor of Appellees against one plaintiff, Debtors appealed, challenging several of the district court’s rulings. Ultimately, the Third Circuit affirmed the district court’s rulings.
As you may recall, class certification is permissible if: “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” See Fed. R. Civ. P. 23(a). Further, a class action can be maintained if all above requirements are satisfied, and, as relevant to this case, “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3).
Considering Debtors’ challenges in turn, the Third Circuit first addressed Debtors’ argument that the district court’s engaging in state choice of law analysis was premature. The Court disagreed, holding that it was reasonable for the district court to conduct state choice of law analysis to assess whether the proposed classes created “intractable management problems” for trial. See Slip. Op. at p. 10; Sullivan v. DB Investments, Inc., 667 F.3d 273, 304 (3d Cir. 2011) (en banc).
Nor was the district court’s conclusion – that the laws of the putative class members’ home states controlled their state law claims – incorrect, according to the Third Circuit. Applying the “most significant relationship” test set out in the Restatement (Second) of Conflict of Laws, the Court observed that, because the representations were not made and received in the same state, the Restatement calls for an analysis of several factors, including the place where plaintiffs acted in reliance upon the alleged misrepresentations, and the place where plaintiffs received such misrepresentations. Noting also that the domicile of the plaintiff is regarded as more important than that of the defendant, the Court held that the balance of these factors support that the laws of plaintiffs’ home states apply. See Slip. Op. at 12-15.
Notably, the Court also rejected Debtors’ argument that, even if each class members’ home state law controlled, the claims were impractical for class certification.
Debtors urged that the state consumer fraud claims be grouped into two categories for litigation: (i) unfair and deceptive conduct; and (ii) false and misleading conduct. However, the Third Circuit agreed with the district court that Debtors “did not provide enough information or analysis to justify the certification of the classes they proposed.” Slip. Op. at 16. Merely asserting that the differences between state consumer fraud laws are “insignificant or non-existent,” Debtors failed to apply any of these state laws to the facts of this case, including elements of reliance, state of mind, and causation, among others. See Slip. Op. at 16-17.
Turning to Debtors’ unjust enrichment claims against the Overbilling Class, the Third Circuit again affirmed the district court’s denial of certification. Although the district court reasoned that the class was not ascertainable, the Third Circuit held that questions of law or fact did not predominate the class. See Slip. Op. at 18-21; Fed. R. Civ. P. 23(b)(3) (“questions of law or fact common to class members [must] predominate over any questions affecting only individual members. . .”). Rather, “individual inquiries would be required to determine whether an alleged overbilling constituted unjust enrichment for each class member.” Slip. Op. at 20.
Additionally, the Third Circuit affirmed the denial of the FDCPA Class, agreeing that the representative plaintiff was inadequate.
Debtors argued that the district court granted summary judgment in favor of the representative plaintiff on his FDCPA allegations, and noted in the opinion that he was “dunned.” See Slip. Op. at 21-22. However, because the alleged classwide violations involved written communications only, and the representative plaintiff testified he had only been contacted by telephone, the Court held this was insufficient to show clear error by the district court.
Notably, the representative plaintiff admitted in a deposition that he had never received a written communication from a debt collector. Further, according to the Third Circuit, the word “dunned” does not imply that a written communication was furnished. See Slop. Op. at 22; cf. In re Hechinger Inv. Co. of Del., Inc., 320 B.R. 541, 549 (Bankr. D. Del. 2004) (“[T]here were no letters, telephone calls, or any attempts whatsoever on the part of Defendant to apply pressure or to ‘dun’ Debtor to encourage more prompt payment . . . .”).
Lastly, the Third Circuit affirmed the district court’s entry of summary judgment against one plaintiff. Although the district court found that the plaintiff had not produced evidence of any non-pecuniary harm, Debtors pointed to a deposition wherein she claimed to have been “harassed and billed. . .” Slip. Op. at p. 23. Rejecting Debtors’ argument, the Third Circuit held that “one bare mention of being ‘harassed and billed,’ without more, is not evidence from which a reasonable jury could conclude that [plaintiff] suffered actual, though non-pecuniary, harm.” Slip. Op. at p. 24.
Accordingly, the Third Circuit affirmed the rulings of the district court.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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