Darilyn Baker, individually, and on behalf of all other persons similarly situated, Plaintiff and Appellant
Autos, Inc., a North Dakota Corporation, d/b/a Global Auto; RW Enterprises, Inc., a North Dakota Corporation; Robert Opperude, an individual; Randy Westby, an individual; and James Hendershot, an individual, Defendants and Appellees
[Copyrighted Material Omitted]
Appeal from the District Court of Ward County, North Central Judicial District, the Honorable Gary H. Lee, Judge.
Larry M. Baer (argued), West Des Moines, IA, and Robert G. Ackre (appeared), Cando, ND, for plaintiff and appellant.
Kraig A. Wilson, Grand Forks, ND, for defendants and appellees Autos, Inc., d/b/a Global Auto, Robert Opperude and James Hendershot.
Erich M. Grant (argued) and Bryan L. Van Grinsven (on brief), Minot, ND, for defendants and appellees RW Enterprises, Inc. and Randy Westby.
Carol Ronning Kapsner, Dale V. Sandstrom. Opinion of the Court by Kapsner, Justice. Gerald W. VandeWalle, C.J., concurred in the result. Daniel J. Crothers, Justice, dissenting.
[¶1] Darilyn Baker (" Baker" ) appeals from a district court order denying her motion for class action certification under N.D.R.Civ.P. 23. Because we conclude the district court erred in applying the law to the thirteen sub-factors of the fair and efficient adjudication factor, we reverse the district court's order denying certification
and remand with instructions to reconsider the sub-factors in light of our holding.
[¶2] In 2007, Baker purchased a 2003 Pontiac Grand Am automobile from Autos, Inc., d.b.a. Global Auto. Baker financed the purchase of the Grand Am by trading in her old vehicle and by entering into a retail installment sales contract with Global Auto. The total balance of the Grand Am, after the credit Baker received for her vehicle trade-in, was $5,470.94. The total included a " document administration fee" of $195 and a " loan fee" of $200. Baker agreed to repay the loan in thirty monthly payments of $247.08. The retail installment contract also provided that if the payment was late, Baker would be charged $25.
[¶3] Baker was late on making some of her required monthly payments, and the vehicle was repossessed. Before Baker defaulted on her loan, Global Auto assigned Baker's contract to RW Enterprises. After the vehicle was repossessed, Baker filed suit in state district court alleging Global Auto and RW Enterprises' sales and lending practices violated state usury law, among other claims. Baker also sued Robert Opperude and James Hendershot, the principal owners of Global Auto, and Randy Westby, the principal owner of RW Enterprises.
[¶4] The defendants removed the case to the U.S. District Court for the District of North Dakota based on federal question jurisdiction. In federal court, Baker filed a motion seeking certification of a class action. While the motion was pending, Baker amended her complaint, effectively eliminating her claims under federal law. Thereafter, the federal district court determined only state law issues remained, and remanded the case back to state court without ruling on the motion to certify a class.
[¶5] Back in state district court, Baker filed a motion to have the suit certified as a class action for all putative purchasers who, subject to the applicable statute of limitations period, may have suffered an injury as a result of Global Auto and RW Enterprises' business practices. Baker alleged the " loan fee," the " document administration fee," and the late payment charge violated North Dakota usury law and the North Dakota Retail Installment Sales Act. Baker argued the defendants' alleged violations of state usury law and the Retail Installment Sales Act were universal and affected approximately five hundred retail installment sales contracts. A hearing was held on the motion for class certification. Following the hearing, the district court entered an order denying the motion for class certification. The court did not rule on the merits of the case.
[¶6] " An order certifying or refusing to certify an action as a class action is appealable." N.D.R.Civ.P. 23(d)(3). This Court has previously summarized the appropriate standard of review of orders certifying or denying class status:
The trial court has broad discretion in determining whether to certify a class action under N.D.R.Civ.P. 23. The trial court's decision to certify a class action will not be overturned on appeal unless the court has abused its discretion. A trial court abuses its discretion only when it acts in an unreasonable, arbitrary, or unconscionable manner, when its decision is not the product of a rational mental process leading to a reasoned decision, or when it misinterprets or misapplies the law.
Howe v. Microsoft Corp., 2003 ND 12, ¶ 6, 656 N.W.2d 285.
[¶7] " Rule 23, N.D.R.Civ.P., is a remedial rule for efficient resolution of the claims or liabilities of many individuals in a single action, eliminating repetitious litigation and possibly inconsistent adjudications involving common questions, related events, or requests for similar relief . . . ." Bice v. Petro-Hunt, L.L.C., 2004 ND 113, ¶ 7, 681 N.W.2d 74. The rule furnishes " an effective procedure for those whose economic position is such that it is unrealistic to expect them to seek to vindicate their rights in separate lawsuits." Id.
[¶8] Rule 23, N.D.R.Civ.P., provides that a trial court may permit class certification if the four following requirements are satisfied:
1. The class is so numerous or so constituted that joinder of all members, whether or not otherwise required or permitted, is impracticable;
2. There is a question of law or fact common to the class;
3. A class action should be permitted for the fair and efficient adjudication of the controversy; and
4. The representative parties fairly and adequately will protect the interests of the class.
Howe, 2003 ND 12, ¶ 8, 656 N.W.2d 285; N.D.R.Civ.P. 23(a) and (b). The four factors are often simply referred to as numerosity, commonality, fair and efficient adjudication, and adequate representation. See, e.g., Werlinger v. Champion Healthcare Corp., 1999 ND 173, 598 N.W.2d 820.
[¶9] " If the court finds the first two requirements have been met, it must decide whether a class action should be permitted for a fair and efficient adjudication of the controversy, and in doing so N.D.R.Civ.P. 23(c) lists thirteen factors for the court to consider." Mann v. N.D. Tax Comm'r, 2007 ND 119, ¶ 33, 736 N.W.2d 464. " The trial court must weigh the competing factors, and no one factor predominates over the others." Rose v. United Equitable Ins. Co., 2002 ND 148, ¶ 9, 651 N.W.2d 683. We have previously elaborated:
In most cases some of the thirteen factors will weigh against certification and some will weigh in favor. It is for the trial court, employing its broad discretion, to weigh the competing factors and determine whether a class action will provide a fair and efficient adjudication of the controversy. Thus, even if [some] of the factors weigh against certification, that does not preclude the court from certifying the class action if, in its opinion, those factors are outweighed by other factors supporting certification.
Id. Weighing the various factors is separate and independent from the ultimate inquiry whether a class can prove its claim.
See Werlinger, 1999 ND 173, ¶ 18, 598 N.W.2d 820. " It is well settled that a district court must make a determination of class certification without delving into the merits of the case. The question is whether the requirements to certify a class action have been met, not whether the plaintiffs will prevail on the merits." Id. (citation omitted).
[¶10] This Court has previously addressed class certification where the underlying cause of action is usury. In Rogelstad v. Farmers Union Grain Terminal Ass'n Inc., 226 N.W.2d 370, 376 (N.D. 1975), this Court held that the district court abused its discretion in denying certification to a group of farmers who were allegedly charged usurious interest rates by a grain elevator association. The district court determined common questions of law or fact did not exist, as there were some putative class members with implied agreements, some with promissory notes, and others with " some other type [of agreement]." Id. at 373. The district
court also reasoned, " If existence of usury is dependent upon promissory note or other written agreement, then interpretation of those express contracts becomes all important to the resolution of the case." Id.
[¶11] On appeal, this Court reversed the district court's order denying certification and remanded with instructions that the class be certified.
Rogelstad, 226 N.W.2d at 378-79. This Court held commonality existed because there were common questions of fact: all the plaintiffs could " offer the same evidence as to the interest rate charged, the computer bookkeeping methods of GTA [grain elevator association], the relationship between GTA headquarters and local elevators, and billing methods, among other things." Id. at 378. We also noted the case presented a common legal question: " 'Did GTA, for " numerous" patrons with grain purchase contracts, utilize an accounting procedure for billing interest on advances that entailed a usurious rate of interest, resulting in a charge or collection of usury?'" Id. Finally, once the evidence was presented as to the common questions of fact, and a disposition was made as to the question of law, we concluded that " either GTA would be entitled to a decision in its favor or the class action plaintiffs would need only to prove their individual damages." Id.
[¶12] There are several similarities between the instant case and Rogelstad. Most significantly, both cases involve the underlying claim of usury, and whether miscellaneous contracts and terms provide sufficient common questions of law or fact. Although the Rogelstad Court was applying a class action rule that has since been amended, the substance of the rule has not changed to such an extent that Rogelstad is no longer good law. See Saba v. Counties of Barnes, Benson, Burleigh, Eddy, Foster, Griggs, Kidder, Nelson, & Wells, 307 N.W.2d 590, 593 (N.D. 1981). Rogelstad remains good law and provides guidance here.
[¶13] On appeal, Baker argues the district court abused its discretion in applying the thirteen factors under N.D.R.Civ.P. 23(c)(1)(A)-(M). Baker contends the court misapplied the law by only permitting certification in instances when damages are uniform. Baker also argues Rogelstad is controlling, and that commonality can still be met where each member of the class has his or her own unique damages.
[¶14] The district court's certification order did not address numerosity or commonality, nor did the defendants' briefs filed in this Court or in the district court. We were not provided with a transcript from the certification hearing, so we must presume that oral arguments followed the briefing and that claims of numerosity and commonality were not challenged. See Sabot v. Fargo Women's Health Org., Inc., 500 N.W.2d 889, 892 (N.D. 1993) ( " The appellant assumes the consequences and the risk for the failure to file a complete transcript." ) (citation omitted). The fact that numerosity was not challenged is not surprising because the plaintiff alleges more than 500 putative class members exist. See Horst v. Guy, 211 N.W.2d 723, 726-27 (N.D. 1973) (forty-eight identifiable class members established numerosity). Neither is it surprising commonality was not challenged given this Court's application of the factor as one easily met. See Klagues v. Maint. Eng'g, 2002 ND 59, ¶ 23, 643 N.W.2d 45 ( " [B]ecause only one question of law or fact is required to establish commonality, courts have classified it as easily satisfied under the rule." ). Defendants and appellants challenge the fair and efficient adjudication factor and whether Baker is an adequate class representative.
[¶15] Although the commonality factor was not challenged, we find it necessary to discuss it because the overarching theme throughout the district court's order denying certification focused on the apparent discrepancies in the vehicle contracts. The district court reasoned that because the various vehicle purchasers were charged miscellaneous fees, interest rates, costs, etc., each contract required individualized review to determine whether a violation of law occurred and if so, the proper remedy. In its analysis of one of the thirteen sub-factors of the fair and efficient adjudication factor, the district court stated:
As the Court understands Baker's argument, all, or nearly all potential class members were charged usurious interest. However, not all were charged the same usurious rates. All, or nearly all potential class members were charged excessive fees. However, not all were charged the same excessive fees. All, or nearly all potential class members were the victims of incomplete or inaccurate loan disclosures. However, not all were victims of the same incomplete or inaccurate disclosures.
[¶16] Here, the issue is whether the district court abused its discretion in denying certification based on the asserted contractual differences. The court's reasoning indicates there needed to be uniformity in the interest rates and fees, or at least more consistency in the contracts for certification to be proper. Although the court focused its analysis on the fair and efficient adjudication factor and its thirteen sub-factors in N.D.R.Civ.P. 23(c)(1)(A)-(M), the substance of the court's reasoning under each sub-factor primarily focused on the inadequacy of common questions of fact. Because individual differences in treatment or potential damages with respect to the various vehicle contracts does not defeat commonality, we conclude the district court erred in applying the law to the thirteen sub-factors of the fair and efficient adjudication factor.
[¶17] An analysis of the commonality factor, as well as an analysis of the thirteen sub-factors of the fair and efficient adjudication factor, is necessary to further explain our holding.
[¶18] " The commonality requirement has been characterized as a low hurdle that is easily surmounted." Alba Conte & Herbert Newberg, Newberg on Class Actions § 13:16 (4th ed. 2002). " [B]ecause only one question of law or fact is required to establish commonality, courts have classified it as easily satisfied under the rule."
Bice, 2004 ND 113, ¶ 9, 681 N.W.2d 74. " Commonality is satisfied if there is a common nucleus of operative facts or there are legal issues common to a class, or when a question of law linking class members is substantially related to the resolution of the litigation, even though the individuals are not identically situated." Conte & Newberg, supra at § 13:16 (4th ed.);
see also Werlinger, 1999 ND 173, ¶ 16, 598 N.W.2d 820 (" When a question of law refers to standardized conduct by the defendants toward members of a proposed class, a common nucleus of operative facts is typically presented, and the commonality requirement is met." ). " When the party opposing the class has engaged in some course of conduct that affects a group of persons and gives rise to a cause of action, one or more of the elements of that cause of action will be common to all of the persons affected." 1 William B. Rubenstein, Newberg on Class Actions § 3:20 (5th ed. 2011).
[¶19] Courts have generally held that not every issue of law or fact needs to be identical for there to be commonality. See Bice, 2004 ND 113, ¶ 9, 681 N.W.2d 74
(" Individual differences in cases concerning treatment or damages do not defeat commonality." ); Paxton v. Union Nat'l Bank, 688 F.2d 552, 561 (8th Cir. 1982) (commonality does not require that every question of law or fact be common to every member of the class; commonality may be satisfied where the question of law linking the class is substantially related to the resolution of the litigation even though the individuals are not identically situated). " Because not all questions need be common, the fact that class members must individually demonstrate their right to recover, or that they may suffer varying degrees of injury, will not bar a finding of commonality." 1 Rubenstein, supra, § 3:20 (5th ed.) (emphasis in original). Thus, even where there is disparity in each class member's damages, that does not necessarily defeat commonality.
[¶20] The issue of commonality in vehicle retail installment contract cases has appeared with some frequency in federal Truth in Lending Act (" TILA" ) cases. Although Baker does not raise TILA in her claim, her issues are comparable to such cases. Common questions of law or fact arising under TILA have included:
(1) whether forms used in connection with consumer credit purchases did not make the required disclosures;
(2) whether monthly billing statements failed to disclose the annual percentage rate of finance charges;
(3) whether particular disclosures are in fact required; and
(4) what are the effects of certain standardized conduct of the defendant.
Conte & Newberg, supra, § 21:3 (4th ed.). One commentator has noted, " [w]hen the [TILA] complaint alleges that there has been an inadequate disclosure of some required information or some other defect in the procedures or forms utilized, common questions of law and fact are found in the standardized conduct of the defendant in allegedly failing to meet those statutory requirements." 7A Charles Wright & Arthur Miller, Federal Practice and Procedure § 1763 (3d ed. 2014).
[¶21] In Chandler v. Sw. Jeep-Eagle, Inc., 162 F.R.D. 302, 308 (N.D.Ill. 1995), commonality was satisfied where class members entered into standard service contracts with an auto dealer. The court noted, even though potential individual issues such as reliance and damages remained, commonality was satisfied because all the claims involved the common question whether the disclosure provisions of the contracts violated TILA or a state consumer fraud act. Id.; see also Heartland Communications, Inc. v. Sprint Corp., 161 F.R.D. 111, 116 (D.Kan.1995) (granting class certification and finding commonality in breach of contract action where the contracts signed by all proposed class members, while not identical, contained virtually the same provision as the contract challenged by the class representative); In re United Energy Corp. Solar Power Modules Tax Shelter Inv. Sec. Litigation, 122 F.R.D. 251, 254 (D.Cal.1988) (finding that, where the allegations concerned common issues of conduct, standardized documents and misrepresentations, the remaining individual issues of reliance, causation and damages did not exclude certification).
[¶22] Similarly, in Violette v. P.A. Days, Inc., 214 F.R.D. 207, 214 (S.D. Ohio 2003), certification was granted where used car buyers brought TILA and state retail installment sales act (" RISA" ) actions against auto dealers who allegedly engaged in unfair trade practices. The court found commonality was satisfied where common questions of fact included the nature of the forms used by the auto dealer and whether the dealer failed to accurately disclose the annual percentage rate. The court also found there were
common questions of law, including the legality of dealer's " Retail Installment Sales Contract and Security Agreement form, whether various fees imposed are permitted by the Ohio Retail Installment Sales Act, whether [the dealer's] disclosures are in violation of the federal Truth In Lending Act, and whether Theft-Gard must be disclosed as part of the finance charge disclosure." Id. at 213-14.
[¶23] In Salvagne v. Fairfield Ford, Inc., 264 F.R.D. 321, 327 (S.D. Ohio 2009), a class was certified for a group of car buyers that challenged a Ford dealer's financing procedures and retail installment sales contracts. The common issues of law and fact included:
the nature of the forms used by Ford; whether those forms are permissible under the laws implicated herein [TILA, Ohio's Consumer Sales Practices Act, and the Equal Opportunity Credit Act], including whether a retail installment sales contract may permissibly be modified by a separate agreement; whether Ford is a creditor under the laws implicated herein; whether Ford failed to make meaningful TILA disclosures; and whether Ford failed to give notice of an adverse credit action.
Id. Although the dealership argued commonality was not met because the various vehicle contracts contained materially different language, the court stated " such factual differences among the class members would not defeat the common issues of law that are present." Id.; but cf. Health Cost Controls v. Sevilla, 365 Ill.App.3d 795, 850 N.E.2d 851, 863, 303 Ill.Dec. 46 (Ill. App. 2006) (stating " where an entity's relationships with other members of a putative class are established by the presence of several individual contracts, any significant differences in the operative language of those contracts militates against a finding of commonality for purposes of class certification" ). We are also aware that in a similar case with many of the same potential class members, U.S. District Court Judge Hovland, applying federal law, denied certification, concluding the lead plaintiff did not show there were questions of law or fact common to the class.
Delorme v. Autos, Inc., 4:11-CV-039, 2012 WL 1606636, at *5 (D.N.D. May 8, 2012).
[¶24] Here, although Baker's putative class of vehicle purchasers includes numerous contracts containing various prices and conditions, the overarching and unifying attribute common to each Global Auto contract concerns the " loan fee," the " document administration fee," the " late fee," and whether the amount or nature of each fee violates state usury law or RISA. Each putative plaintiff signed the same standard form contract, albeit with varying price terms written in for each respective vehicle. The district court noted the potential class members were not all charged the same usurious rates or excessive fees or subject to varying inaccurate or incomplete disclosures. However, these variations speak more to the issue of damages, and it is well established that differences in the degree of injury or damages will not bar a finding of commonality. See 1 Rubenstein, supra, § 3:20 (5th ed.); Morgan v. Coats, 33 So.3d 59, 65 (Fla. Dist. Ct. App. 2010) (" While it is true that there will be some factual variations among the class members' claims . . . such issues go to the determination of damages rather than to liability. And individualized damages inquiries do not preclude class certification." ).
[¶25] Given the common characteristics in the " loan fee," the " document administration fee," the " late fee," and whether the amount or nature of each fee violates state usury law or RISA, we conclude there is a common nucleus of operative
facts and legal issues common to Baker and her putative class. Generally, commonality is not difficult to overcome, nor is it automatically defeated when individual differences in damages may occur.
See Bice, 2004 ND 113, ¶ 9, 681 N.W.2d 74. This case presents several common questions of both law and fact, for instance:
1. Were the buyers charged a $25 late fee?
2. Does RISA prohibit a $25 late fee?
3. Were the plaintiffs charged a loan fee?
4. Does the loan fee violate RISA or state usury law?
5. Were the plaintiffs charged a document administration fee?
6. Does the document administration fee violate RISA or state usury law?
7. Were the plaintiffs aware of document administration fees or loan fees?
8. Does RISA require disclosure of document administration and loan fees?
There is some evidence that indicates not all the purchasers were charged a " document administration fee," a " loan fee," or subject to a " late fee." This fact alone does not defeat commonality. For instance, if one group of purchasers was only charged a " late fee" and another only charged a " loan fee," it may be appropriate to have separate sub-classes. Those purchasers who cannot demonstrate they were subject to the fees would not qualify for the sub-class. Because the claims all involve similar allegations concerning the legality of Global Auto's " document administration fees," " loan fees," and " late fees," there is commonality in this case.
[¶26] There is also some indication the district court operated under the erroneous view that commonality requires both common questions of law and fact. The court, apparently referring to commonality, stated, " [w]hile there may indeed be common questions of law regarding usury and compliance with the retail installment sales act, common questions of fact are missing. Each individual contract will need to be reviewed to determine whether any violations of law occurred, and what an appropriate remedy would be." This is an incorrect interpretation of the law. Only one question of law or fact is required to establish commonality.
Bice, 2004 ND 113, ¶ 9, 681 N.W.2d 74. While either a single question of law or fact is sufficient, this case presents several questions of both law and fact that are common to the proposed class.
[¶27] In Rogelstad, we determined the common fact issues included the interest rate charged and the defendant's bookkeeping and billing methods. 226 N.W.2d at 378. Individual issues did not defeat commonality in Rogelstad:
the only possible differences between the contentions of the named plaintiff and the potential plaintiffs would arise from the fact that some potential plaintiffs may have signed notes for their advances while the named plaintiff and other potential plaintiffs did not, the individual differences as to dates of advances and repayments, and amounts of damages. The similarities, which will very likely be determinative of the right of the class plaintiffs to recover, are largely legal questions: whether the usury law applied to the factual situation we have outlined, whether an agreement is necessary in order to constitute usury, or whether the mere charging and receipt of usurious interest is sufficient. We believe that these issues predominate over any questions affecting only individual members . . . .
Id. at 376 (internal quotation marks omitted). Analogously here, the proposed class, according to ...