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McKeage v. TMBC, LLC

United States Court of Appeals, Eighth Circuit

February 13, 2017

Robert McKeage; Janet McKeage, on behalf of themselves and all others similarly situated Plaintiffs - Appellees
v.
TMBC, LLC Defendant-Appellant Tracker Marine Retail, LLC; Bass Pro Outdoor World, LLC Defendants Robert McKeage; Janet McKeage, on behalf of themselves and all others similarly situated Plaintiffs - Appellants
v.
TMBC, LLC Defendant-Appellee Tracker Marine Retail, LLC; Bass Pro Outdoor World, LLC Defendants

          Submitted: September 22, 2016

         Appeals from United States District Court for the Western District of Missouri - Springfield

          Before WOLLMAN, BRIGHT, [1] and KELLY, Circuit Judges.

          PER CURIAM

         Robert and Janet McKeage brought this class action lawsuit to challenge TMBC's[2] nationwide practice of charging a document fee when selling boats and trailers under form contracts governed by Missouri law. After approving class certification, the district court determined that TMBC prepared legal documents attendant to its sales and that charging a fee for those documents constituted unauthorized law business in violation of Mo. Rev. Stat. §§ 484.010 and 484.020. The district court granted summary judgment in favor of the class and awarded treble damages in the amount of $21, 735, 754. The district court also awarded attorneys' fees to class counsel in the amount of $2, 425, 359, to be paid out of the common fund.

         TMBC filed an appeal challenging the class certification, grant of summary judgment, and application of Missouri law to sales that occurred outside Missouri. The McKeages filed a cross appeal to enforce the fee-shifting provision in TMBC's contract and to challenge the district court's calculation of fees based on the amount of untrebled damages rather than the entire common fund. We affirm the district court on the main appeal. We reverse and remand for further proceedings on the cross appeal.

         I

         TMBC is a corporation headquartered in Springfield, Missouri. It sells boats and trailers through dealerships across the nation, most of which are located within Bass Pro Shops.[3] On May 23, 2008, Robert and Janet McKeage purchased a boat from TMBC at the Tracker Boat Center located inside the Bass Pro Shop in St. Charles, Missouri. The purchase was memorialized in a standard form contract TMBC has used since 2007, which has a choice-of-law provision that states, in relevant part:

GOVERNING LAW. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF MISSOURI. The venue for any action or proceeding arising from this Agreement . . . shall be in Greene County, Missouri. The prevailing party in any such action or proceeding shall be entitled to recover all litigation costs and expenses, including reasonable attorneys' fees at all levels of litigation . . . .

         As part of the contract, TMBC charged the McKeages a $75 "document fee." TMBC charged the fee to cover the cost of preparing and/or completing documents such as the form contract itself (sometimes referred to by the parties as the Order Acknowledgment and Agreement of Sale, or OAAS form); a bill of sale; a power of attorney form; and title, license, and registration documents.

         Unhappy with their purchase, the McKeages contacted an attorney to help them rescind the sale. After reviewing the contract, counsel for the McKeages filed suit against TMBC in the Circuit Court for St. Charles County, Missouri. Among other things, the McKeages alleged that TMBC's practice of charging a document fee constituted unauthorized law business in violation of Mo. Rev. Stat. §§ 484.010 and 484.020.[4] Pursuant to the contract's choice-of-law provision, venue was thereafter transferred to Greene County, Missouri.

         The McKeages asked the state court to certify a nationwide class action. The state court certified a class, but limited it to customers whose purchases occurred in Missouri. The McKeages sought review from the Missouri Supreme Court, contending that the district court should have certified a nationwide class. The Missouri Supreme Court agreed, noting that TMBC chose Missouri law for the standardized form contracts it used nationwide. State ex rel. McKeage v. Cordonnier, 357 S.W.3d 597, 601 (Mo. banc 2012). Pursuant to the Missouri Supreme Court's decision, the state trial court then certified a nationwide class.

         In March 2012, TMBC removed the action to federal district court pursuant to the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(8). After removal, TMBC brought a motion to decertify the class. Extensive litigation followed over whether a class action was appropriate, and eventually the district court denied the motion to decertify. After TMBC unsuccessfully petitioned this court for permission to appeal the denial of its motion to decertify the class, TMBC asked the district court to reconsider. Ultimately, the district court required the McKeages' counsel to hire reviewers to manually inspect each of TMBC's customer files in order to determine which contracts contained a Missouri choice-of-law provision, the inclusion of which formed the basis for the nationwide class. After the document review, the class was determined to consist of approximately 100, 000 members.

         The parties filed cross motions for summary judgment. As relevant to the issues now on appeal, TMBC argued that charging a document fee did not amount to unauthorized law business because TMBC's employees did not exercise legal judgment when filling out documents for customers. TMBC also argued that some individuals had been improperly identified as customers who signed contracts governed by Missouri law. TMBC further argued that Missouri law should not be applied nationwide to customers who signed contracts with TMBC outside Missouri. Finally, TMBC argued that damages should not be calculated based on the entire document fee because portions of the fee went to services that did not constitute unauthorized law business.

         The district court rejected TMBC's arguments and granted the McKeages' motion for summary judgment. The district court determined that the class members were properly identified, TMBC's conduct in charging a document fee constituted unauthorized law business, Missouri law applied to transactions that occurred outside Missouri, and damages should be awarded based on the entire document fee. The district court then awarded treble damages pursuant to Mo. Rev. Stat. § 484.020. Based on the number of members in the class, the amount of damages was calculated at $21, 735, 754.

         After the district court's grant of summary judgment, the McKeages filed a motion for attorneys' fees. Although the parties' contract provided that "[t]he prevailing party in any [action or proceeding arising from the agreement] shall be entitled to recover . . . reasonable attorneys' fees at all levels of litigation, " the district court determined that "even in cases where a fee shifting provision may be applicable, attorney's fees should come from the common fund." The district court used the percentage-of-the-benefit method to calculate the fees and determined that thirty-three percent was appropriate in this case. Finally, the district court noted that the common fund included $7, 349, 574 in actual damages and $14, 386, 180 in statutory interest and treble damages. Based on a trilogy of Eighth Circuit cases involving treble damages under Section 4 of the Clayton Act-Twentieth Century-Fox Film Corp. v. Brookside Theatre Corp., 194 F.2d 846 (8th Cir. 1952); International Travel Arrangers, Inc. v. Western Airlines, Inc., 623 F.2d 1255 (8th Cir. 1980); and Rose Confections, Inc. v. Ambrosia Chocolate Co., 816 F.2d 381 (8th Cir. 1987)-the district court concluded that calculating the fee award "from the actual damages [rather than treble damages] . . . is preferable because it better reflects the policies behind a common fund recovery[.]" As a result, the district court awarded class counsel $2, 425, 359.42 in attorneys' fees to be paid from the common fund, representing thirty-three percent of the untrebled damages.

         TMBC timely appealed, contending: (1) the class should not have been certified because individualized proof was required to determine whether each customer's contract contained a Missouri choice-of-law provision; (2) the district court misinterpreted Missouri case law regarding unauthorized law business in granting summary judgment to the class; and (3) the district court erred in applying Missouri law to conduct which occurred outside Missouri. The McKeages filed a timely cross appeal contending that the district court should have enforced the ...


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