Page 20 - Cleveland Vol 5 No 3

SHMUEL KLEINMAN | Class Action
Varying Representations Do Not Defeat Rule 23 Predominance
Thousands of people are cheated by a promise of “free” internet with a one-year phone contract. ey pay $320 for the phone service, but the internet ends a er one month. Sounds like a solid case of fraud: false statement in the ad about free in- ternet; reliance by paying $320; and damages of the loss of 11 months of internet. What do you tell a potential client when they present these facts? Sue over $100? Maybe in a class ac- tion. But what if the defendant claims that its customer service representa- tives gave varying descriptions of the “free” internet o er to consumers?
Class action claims o en involve an element of reliance premised on written representations contained in standard form agreements. In those cases, defendants frequently attempt to defeat Rule 23 predominance by claiming that varying representa- tions were made to unidenti ed class members that con ict with the terms of the standard form agreement, or that the customers “understood” the representation di erently. Courts have rejected these arguments when defendants have been unable to (a) specify which absent class members received the varying representations, or (b) demonstrate that the varying representations were integral to the alleged fraud.
“Speculation” is the term that the Supreme Court of Ohio applied to an argument that unidenti ed ab- sent class members did not rely on a standard form agreement due to varying representations. Baughman v. State Farm Mutual Auto Ins. Co., 88 Ohio St.3d 480, 491 (Ohio 2000). e
Baughman court rejected an argu- ment that a plain- ti ’s fraud claim failed to satisfy Rule 23 predomi- nance because an unidenti ed “someone” knew “something.”
In Baughman, the plainti s sued State Farm for charging redundant premiums for uninsured motorist (UM) and underinsured motorist (UIM) coverage. Although the class members paid additional UM and UIM premiums, they received no ad- ditional UM or UIM coverage. State Farm argued that the proposed class did not satisfy Rule 23’s predomi- nance requirements, because some of their agents had purportedly made ‘oral’ disclosures, to ‘explain’ the re- dundant premiums, to ‘certain’ un- identi ed class members. Id. at 491. e Baughman court rejected State Farm’s argument because State Farm’s failed to identify a single class mem- ber to whom the disclosure had been made: “no policyholder allegedly possessing such information has yet been identi ed by name, and any at- tempt at this point to evaluate the na- ture or extent, or even the existence, of individual questions a ecting this potential group,... would rest on pure speculation.” Id.
A defendant’s speculation that class members might have received a dis- closure that con icted with a stan- dard form agreement was similarly rejected by the Northern District of Illinois in Arenson v. Whitehall Con- valescent and Nursing Home, 164 F.R.D. 659 (N.D. Illinois 1996). In Arenson, a nursing home agreed in its Schedule of Charges, that it would bill residents for pharmaceuticals at the same rate that the nursing home paid its supplier. Id. at 661. e plain- ti alleged that the home violated the written agreement by providing residents fraudulent invoices from its supplier re ecting in ated prices. Id. e nursing home argued that indi- vidual issues predominated because a Schedule of Charges for 1993 did not contain the provision requiring the nursing home to bill for pharmaceu- ticals at the nursing home’s cost. Id. at 665. e district court dismissed the defense’s argument because the defendant “never identi ed any resi-
dents to whom [the updated Schedule of Charges] was given.” Id. at 666.
Even when a defendant can identify class members who received vary- ing representations, predominance is still satis ed when varying oral rep- resentations are not integral to the fraud claim. For example, in Peterson v. H & R Block Tax Services, Inc., 174 F.R.D. 78 (N.D. Ill. 1997), the plain- ti s sought certi cation of a class of taxpayers who were deceived by the defendant’s representations regarding availability of loans from the defen- dant pending the IRS’s disbursement of their tax refund. Id. at 80-81. e defendant tried defeating predomi- nance, arguing that class members were exposed to di ering represen- tations through speci c advertising the class members might have seen or received, as well as discussions with defendant’s personnel. Id. at 82. e district court rejected defendant’s ar- gument, noting that (1) “the claims in this case are premised on written mis- representations contained in standard documents furnished to every class member—a situation that presents a ‘classiccasefortreatmentasaclassac- tion’”; and (2) the alleged representa- tions made outside the standard form documents weren’t integral to the al- leged fraud. Id. at 83; see In re United Energy Corp. Solar Power Modules Tax Shelter Investments Securities Litig., 122 F.R.D. 251, 255 (C.D. Cal. 1988) (holding that varying oral represen- tations do not defeat predominance when the complaint “focuses solely on disclosures in and omissions from the standardized letters issued”).
In conclusion, when class claims are premised on a defendant’s repre- sentations in standard form agree- ments, Rule 23 predominance is not defeated by either (1) assertions that unidenti ed class members received varying representations; or (2) vary- ing oral representations that are not integral to allegations of fraud based on standard form documents.
Shmuel Kleinman is a law clerk at Dworken & Bernstein and is a second year (2L) law school student.
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