No-Injury Class Rejected by State Supreme Court

Last week, the Ohio Supreme Court ruled in Felix v. Ganley Chevrolet, Inc., No. 2015-Ohio-3450 (Aug. 27, 2015), that courts cannot certify class actions that include uninjured members, as such a class will fail to satisfy predominance.

In this case, a trial court had certified a class action of all consumers who purchased vehicles from a dealership through a contract that included an unenforceable arbitration provision. The trial court did so even though there was no evidence that any class member, aside from the class representative, had a dispute with the dealership and had experienced an injury. The trial court eventually awarded each consumer $200 in damages.  

The Court identified several key principles. Class action suits are the exception to the usual rule that litigation is conducted by and on behalf of only the individually named parties. Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1432 (2013), citing Califano v. Yamasaki, 442 U.S. 682, 700-701 (1979). To fall within that exception, the party bringing the class action must affirmatively demonstrate compliance with the procedural rules governing class actions. Id., citing Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551-2552 (2011).  The United States Supreme Court has insisted that courts give careful consideration to the class certification process, holding that Rule.23 is not “a mere pleading standard.” Dukes, 131 S.Ct. at 2551.  Rather, the party seeking class certification must affirmatively demonstrate compliance with the rules for certification and be prepared to prove that there are in fact sufficiently numerous parties, common questions of law and fact, etc.

Next, plaintiffs bringing consumer fraud (OCSPA) class action suits must allege and prove that actual damages were proximately caused by the defendant’s conduct.  See Konarzewski v. Ganley, Inc., 8th Dist. Cuyahoga No. 92623, 2009–Ohio–5827 (“class action plaintiffs must prove actual damages under the CSPA”). Thus, proof of actual damages is required before a court may properly certify a class action. Searles v. Germain Ford of Columbus, L.L.C., 10th Dist. Franklin No. 08AP-728, 2009-Ohio-1323; see also Butler v. Sterling, Inc., 2000 WL 353502, *4 (6th Cir. Mar. 31, 2000); Johnson v. Jos. A. Bank Clothiers, Inc., 2014 WL 4129576, *3-4 (S.D. Ohio Aug. 19, 2014). These requirements in Ohio are consistent with the majority of decisions by other states’ appellate courts, which also hold that plaintiffs who bring private causes of actions under their states’ consumer-protection statutes are required to plead and prove actual damages or injury.  See, e.g., Meyer v. Sprint Spectrum  L.P., 45 Cal.4th 634, 642-643, 88 Cal.Rptr.3d 859, 200 P.3d 295, (2009); Wallis
v. Ford Motor Co., 362 Ark. 317, 327-328, 208 S.W.3d 153 (2005); Tietsworth v.  Harley-Davidson, Inc., 270 Wisc.2d 146, 169, 677 N.W.2d 233 (2004); Frank v. DaimlerChrysler Corp., 292 A.D.2d 118, 741 N.Y.S.2d 9, 12-13 (2002); Yu v. Internatl. Business Machines Corp., 314 Ill.App.3d 892, 845-846, 732 N.E.2d 1173 (2000); Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 783-784, 792, 719 P.2d 531 (1986).

Third, plaintiffs in class action suits must demonstrate that they can prove, through common evidence, that all class members were in fact injured by the defendant’s actions. In re Rail Freight Fuel Surcharge Antitrust Litigation—MDL No. 1869, 725 F.3d at 252. Although plaintiffs at the class certification stage need not demonstrate through common evidence the precise amount of
damages incurred by each class member, Behrend, 133 S.Ct. at 1433, they must adduce common evidence that shows all class members suffered some injury. In re Rail Freight Fuel Surcharge Antitrust Litigation at 252, citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623–624, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997), and Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 815-816 (7th Cir.2012).  This inquiry into whether there is damage-in-fact is distinct from the inquiry into actual damages: fact of damage pertains to the existence of injury, as a predicate to liability; actual damages involves the quantum of injury, and relate to the appropriate measure of individual relief.  See Martino v. McDonald’s Sys., Inc., 86 F.R.D. 145, 147 (N.D.Ill.1980). Even if determining the amount of damages does not defeat the predominance inquiry, a proposed class action requiring the court to determine individualized fact of damages does not meet the predominance standards of Rule 23(b)(3). See In re Live Antitrust Litigation, 247 F.R.D. 98 (C.D.Cal.2007) (recognizing the
distinction between demonstrating the fact of damages and the amount of damages); Catlin v. Washington Energy Co., 791 F.2d 1343, 1350 (9th Cir.1986) (“[T]he requirement that plaintiff prove
‘both the fact of damage and the amount of damage * * * are two separate proofs.’ ”)

If a class plaintiff fails to establish that all of the class members were damaged, there is no showing of predominance under Civ.R. 23(b)(3). See Behrend, 133 S.Ct. at 1432; see also Cullen v. State Farm Mut. Auto. Ins. Co., 137 Ohio St.3d 373, 2013-Ohio-4733, 999 N.E.3d 614.  Indeed, a key purpose of the predominance requirement is to test whether the proposed class is sufficiently cohesive to warrant adjudication by representation, observed the Court.  Perhaps the most basic requirement to bringing a lawsuit is that the plaintiff suffer some injury. Apart from a showing of wrongful conduct and causation, proof of actual harm to the plaintiff has been an indispensable part of civil actions. See Schwartz & Silverman, Common Sense Construction of Consumer Protection Acts, 54 U.Kan.L.Rev. 1, 50 (2005).

Based on these principles, the Court held that all members of a class in class action litigation alleging violations of the OCSPA must have suffered injury as a result of the conduct challenged in the suit.  Here, the class, as certified, failed because there was no showing that all class members suffered an injury in fact. The broadly defined class encompassed consumers who purchased a vehicle through a purchase contract that contained the unconscionable arbitration provision. But there was absolutely no showing that all of the consumers who purchased vehicles through a
contract with the offensive arbitration provision were injured by it or suffered any damages at all.
Finally, the trial court’s holding that it could award $200 to each member of the class as a matter of the trial court’s discretion is "based on a fiction."

 

"The Rise of Empty Suit Litigation"

Two of my partners here at SHB, Victor Schwartz (of the famed “Schwartz on Torts” casebook) and Cary Silverman, just published a new article, “The Rise of “Empty Suit” Litigation®. Where Should Tort Draw the Line?”,  80 Brook. L. Rev. 599 (2015) .  

The article focuses on litigation where an individual or class action plaintiff has suffered no real harm, physical, emotional or economic.  These include:

·         claims for recovery of speculative emotional harm;

·         liability for the estimated cost of medical monitoring following exposure to a potentially harmful substance absent a physical injury;

·         class action litigation claiming that a product’s actual value was lower than the purchase price or that the resale value of a product diminished because of an alleged latent defect, even when the product functioned properly for most or all consumers; and

·         class actions challenging product labeling or advertising on behalf of all consumers where few, if any, of them were actually misled.

Empty Suit Litigation®” addresses both individual claims where there has been no real injury or economic loss, and class actions that rely on speculative or expert-driven theories of harm or class-wide damages.

Definitely worth checking out.