Konarzewski v. Ganley, Inc. , 2017 Ohio 4297 ( 2017 )

[Cite as Konarzewski v. Ganley, Inc., 2017-Ohio-4297.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 104681
WILLIAM KONARZEWSKI, ET AL.
PLAINTIFFS-APPELLEES
vs.
GANLEY, INC., ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-08-647589
BEFORE: S. Gallagher, J., Boyle, P.J., and Laster Mays, J.
RELEASED AND JOURNALIZED: June 15, 2017
ATTORNEYS FOR APPELLANTS
A. Steven Dever
A. Steven Dever Co., L.P.A.
13363 Madison Avenue
Lakewood, Ohio 44107
Georgia Hatzis
David D. Yeagley
Ulmer & Berne, L.L.P.
1660 West 2nd Street, Suite 1100
Cleveland, Ohio 44113
ATTORNEYS FOR APPELLEES
Lewis A. Zipkin
April Bensimone
In Son J. Loving
Zipkin Whiting Co., L.P.A.
3637 South Green Road
Cleveland, Ohio 44122
SEAN C. GALLAGHER, J.:
{¶1} Defendants-appellants Ganley, Inc. and Ganley Management Co.
(collectively “defendants”) appeal the trial court’s decision to grant the motion for class
certification of plaintiffs-appellees William Konarzewski and Rachel McCormick
(collectively “plaintiffs”). Upon review, we reverse the decision of the trial court.
{¶2} On January 16, 2008, plaintiffs filed a class action complaint against
defendants, 1 asserting claims individually and as representatives of a class of motor
vehicle purchasers. The alleged claims included violations of the Ohio Consumer Sales
Practices Act (“OCSPA”), violations of the Ohio Retail Installment Sales Act (“RISA”),
intentional infliction of emotional distress, gross negligence, fraud, and breach of
contract. The putative class action involves a claim under the OCSPA arising from
defendants’ use of certain form documents, namely a retail sales installment contract
(“RISC”) and a conditional delivery agreement (“CDA”), which were alleged to contain
conflicting, misleading, unconscionable, and substantially one-sided terms.
{¶3} In the course of the proceedings, the parties filed summary judgment motions.
On December 5, 2008, the trial court issued its ruling on the motions for summary
judgment. In part, the trial court granted partial summary judgment to the plaintiffs,
finding defendants’ use of the RISC and CDA violated the OCSPA.
1
Ganley Management Co. was sued as the entity that “owns, operates, manages, and/or
controls” numerous “Ganley” dealerships that use substantially the same forms.
{¶4} Plaintiffs also filed a motion to certify a class action for the OCSPA claims,
defining the purported class as follows:
All consumers, who from within two years prior to the commencement of
this action to the present, purchased or attempted to purchase a vehicle from
Defendants or any dealership owned, operated, managed, or controlled by
Ganley Management Co., which transaction involved the use of a RISC
together with a CDA.
On December 5, 2008, the trial court issued a ruling that denied class certification.
{¶5} The ruling on class certification was reversed by a panel of this court in
Konarzewski v. Ganley, Inc., 8th Dist. Cuyahoga No. 92623, 2009-Ohio-5827(“Konarzewski I”). Although the court determined that the Civ.R. 23 requirements for
certifying a class action had been satisfied, the court found the proposed class definition
was inconsistent with the limitations on damages under the OCSPA. Id. at ¶ 44-47. The
court determined that the scope of available damages for class actions brought under the
OCSPA is limited and that class action plaintiffs must prove actual damages under R.C.
1345.09(B). Id. at ¶ 44-46. As a result, the court found that the trial court had abused
its discretion by failing to modify the class or giving plaintiffs the opportunity to modify
the class to conform with the additional requirement of actual damages found in R.C.
1345.09(B) for class actions brought for violations of the OCSPA. Id. at ¶ 49.
Importantly, in Konarzewski I, the class definition, as then proposed, was never certified.
{¶6} On remand, modified class definitions were proposed for certification. On
June 10, 2016, the trial court granted class certification of a class defined as follows:
All Ganley consumers who, from within two years prior to the
commencement of this action to the present, purchased a vehicle involving
the use of the RISC, together with the CDA, and did not receive the benefit
of the bargain and as a result suffered actual damages.
The trial court recognized its duty to conduct a rigorous analysis when determining
whether to certify a class pursuant to Civ.R. 23 and considered the Civ.R. 23 factors.
The court determined that plaintiffs satisfied the requirements of Civ.R. 23 for class
certification and that the class definition was sufficient to comply with the requirement of
R.C. 1345.09(B) that class members must have actual damages to pursue a class action
under the OCSPA. The court certified the class under Civ.R. 23(B)(3), as the only
subsection applicable to the case.
{¶7} Defendants timely filed this appeal challenging the trial court’s decision to
grant class certification.
{¶8} A trial court has broad discretion in determining whether to certify a class
action, and its determination will not be disturbed absent an abuse of discretion. Marks
v. C.P. Chem. Co., Inc., 31 Ohio St.3d 200, 509 N.E.2d 1249 (1987), syllabus. The trial
court’s discretion is not unlimited, but is bound by and must be exercised within the
framework of Civ.R. 23. Hamilton v. Ohio Savs. Bank, 82 Ohio St.3d 67, 70,
1998-Ohio-365, 694 N.E.2d 442.
{¶9} “[A] party seeking certification pursuant to Civ.R. 23 bears the burden of
demonstrating by a preponderance of the evidence that the proposed class meets each of
the requirements set forth in the rule.” Cullen v. State Farm Mut. Auto Ins. Co., 137
Ohio St.3d 373, 2013-Ohio-4733, 999 N.E.2d 614, ¶ 15. The Ohio Supreme Court has
noted the following seven requirements that must be met in order for a class action to be
maintained under Civ.R. 23:
(1) an identifiable class must exist and the definition of the class must be
unambiguous; (2) the named representatives must be members of the class;
(3) the class must be so numerous that joinder of all members is
impracticable; (4) there must be questions of law or fact common to the
class; (5) the claims or defenses of the representative parties must be typical
of the claims or defenses of the class; (6) the representative parties must
fairly and adequately protect the interests of the class; and (7) one of the
three Civ.R. 23(B) requirements must be met.
Hamilton at 71, citing Civ.R. 23(A) and (B), and Warner v. Waste Mgt., 36 Ohio St.3d
91, 521 N.E.2d 1091 (1988). Class certification must be denied upon the failure to meet
any one of the Civ.R. 23 requirements. Blue Ash Auto, Inc. v. Progressive Cas. Ins. Co.,
8th Dist. Cuyahoga Nos. 104251 and 104252, 2016-Ohio-7965, ¶ 11.
{¶10} As an initial matter, we reject any contention by plaintiffs that we are
somehow bound by the determinations made in Konarzewski I, 8th Dist. Cuyahoga No.
92623, 2009-Ohio-5827. In that appeal, the Civ.R. 23 requirements were considered
with regard to the proposed class then before the court. That proposed class was never
certified, nor was a mandate issued for class certification. Rather, the case was
remanded for modification of the class definition, albeit to comport with the requirement
of actual damages found in R.C. 1345.09(B). That decision has no effect upon the
review of a subsequently certified class. We find nothing in the doctrine of the law of
the case that would preclude a court from revisiting the class certification requirements
with regard to a modified or revised class definition. Class certification cannot be
granted unless all requirements for class certification have been met, and the court is
required to conduct a rigorous analysis in making its determination. Cullen at ¶ 16.
{¶11} We also must recognize that there have been intervening decisions by the
Ohio Supreme Court since the decision in Konarzewski I, including Cullen; Felix v.
Ganley Chevrolet, Inc., 145 Ohio St.3d 329, 2015-Ohio-3430, 49 N.E.3d 1224; and
Stammco, L.L.C. v. United Tel. Co., 125 Ohio St.3d 91, 2010-Ohio-1042, 926 N.E.2d
292, ¶ 11. We are not persuaded by plaintiffs’ arguments to the contrary. Each of the
Ohio Supreme Court decisions represents an intervening change in the law with respect to
certification of a class action that is applicable in this matter. It is well settled that an
intervening decision by the Ohio Supreme Court is an extraordinary circumstance that
creates an exception to the law-of-the-case doctrine and must be followed by inferior
courts. Hopkins v. Dyer, 104 Ohio St.3d 461, 2004-Ohio-6769, 820 N.E.2d 329, ¶ 1, 23.
{¶12} In Cullen, the Ohio Supreme Court indicated that the rigorous analysis
“requires the court to resolve factual disputes relative to each requirement and to find,
based upon those determinations, other relevant facts, and the applicable legal standard,
that the requirement is met.” Cullen, 137 Ohio St.3d 373, 2013-Ohio-4733, 999 N.E.2d
614, at ¶ 16. A trial court may examine the underlying merits of the claim as part of its
rigorous analysis, but only to the extent necessary to determine whether the Civ.R. 23
requirements are satisfied. Id. at ¶ 17. Further, “deciding whether a claimant meets the
burden for class certification pursuant to Civ.R. 23 requires the court to consider what
will have to be proved at trial and whether those matters can be presented by common
proof.” Id. at ¶ 17.
{¶13} In Felix, which involved the certification of a class for claims based on
alleged violations of the OCSPA, the Ohio Supreme Court found that “[p]roof of actual
damages is required before a court may properly certify a class action.” Id. at ¶ 31. The
court recognized that at the class-certification stage, plaintiffs “must demonstrate that
they can prove, through common evidence, that all class members were in fact injured by
the defendant’s actions.” Id. at ¶ 33, citing In re Rail Freight Fuel Surcharge Antitrust
Litigation - MDL No. 1869, 725 F.3d 244, 257 (D.C.Cir.2013). The court indicated that
although the precise amount of damages incurred by each class member need not be
shown, the “fact of damage,” which requires that “all class members suffered some
injury,” must be shown by common evidence. Felix at ¶ 33. “If the class plaintiff fails
to establish that all of the class members were damaged (notwithstanding questions
regarding the individual damages calculations for each class members), there is no
showing of predominance under Civ.R. 23(b)(3).” Id. at ¶ 35. “‘[A] proposed class
action requiring the court to determine individualized fact of damages does not meet the
predominance standards of Rule 23(b)(3).’” Id. at ¶ 34, quoting Gonzales v. Comcast
Corp., E.D.Cal. No. 10-cv-01010-LJO-BAM, 2012 U.S. Dist. LEXIS 196, 55 (Jan. 3,
2012). Under the circumstances in Felix, the court determined that the class was broadly
defined and 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.” Id. at ¶ 37.
{¶14} As was the case in Felix, we find the requirement of Civ.R. 23(B)(3) was
not satisfied in this matter. The trial court found that of the Civ.R. 23(B) requirements,
only subsection (3) is applicable. This is not disputed by the parties. For a class to be
certified under Civ.R. 23(B)(3), the trial court must find (1) “that the questions of law or
fact common to the members of the class predominate over any questions affecting only
individual members” and (2) “that a class action is superior to other available methods for
the fair and efficient adjudication of the controversy.” Cullen at ¶ 29.
{¶15} The modified class definition includes purchasers who “did not receive the
benefit of the bargain and as a result suffered actual damages.” We recognize that this
definition attempts to comport with the actual damages requirement under the OCSPA.
However, consideration must be given to how those purchasers who suffered actual
damages are to be ascertained. As recognized by the Ohio Supreme Court: “‘the CSPA’s
damages limitation impacts not only the damages that may ultimately be recovered by a
properly certified class but whether a putative class may be properly certified as a Civ.R.
23(B)(3) CSPA class in the first instance.’” Cullen, 137 Ohio St.3d 373,
2013-Ohio-4733, 999 N.E.2d 614, at ¶ 40, quoting Felix v. Ganley Chevrolet, Inc., 8th
Dist. Cuyahoga No. 98985, 2013-Ohio-3523, ¶ 72 (Rocco, J., dissenting).
{¶16} We recognize that the trial court was cognizant of the decision in
Konarzewski I and did attempt to conduct the rigorous analysis required under Cullen in
determining whether to grant class certification. However, the trial court’s analysis was
flawed. The trial court glossed over the individualized determinations necessary for
determining whether members of the putative class in fact suffered damages. The trial
court found that it had “already determined the defendants’ use of the RISC and CDA
violated the Ohio CSPA” and that the liability arising from the OCSPA violations was
“common to the class and predominates over the issue of actual damages.” However,
“[a] colorable claim does not satisfy the requirements of Civ.R. 23.” Cullen at ¶ 34. In
order to satisfy Civ.R. 23(C), plaintiffs must demonstrate and a trial court is required to
find that questions common to the class in fact predominate over individual ones. Id.{¶17} The trial court recognized that the issue of calculating each class member’s
damages would require an individualized determination. However, the court did not
consider whether there was any common proof showing that each class member was in
fact damaged by defendants’ conduct. The trial court found it unnecessary to the
analysis and proceeded to determine that “defendants’ liability arising from their CSPA
violations is common to the class and predominates over the issue of actual damages.”
The trial court’s opinion is in direct contravention of the Ohio Supreme Court’s decision
in Felix, which holds that “[p]roof of actual damages is required before a court may
properly certify a class action” and that plaintiffs “must adduce common evidence”
demonstrating that all class members suffered some injury. Felix, 145 Ohio St.3d 329,
2015-Ohio-3430, 49 N.E.3d 1224, at ¶ 31, 33. The trial court never recognized the Felix
decision, despite it being cited by defendants in opposition to class certification.
Moreover, insofar as the trial court deemed the issue of defendants’ liability common to
the class, “[t]here is no authority in the statutory scheme or in our precedent to support a
damages award to a class member in class action litigation arising from the OCSPA
absent a showing that the class member was injured and sustained damages as a result of
the defendant’s conduct.” Felix at ¶ 38.
{¶18} Similar to Felix, the plaintiffs herein failed to demonstrate that they can
prove, through common evidence, that all class members were in fact injured by
defendants’ use of the RISC and CDA forms. There is no common proof of “the fact of
damage.” Rather, the question of whether a particular purchaser suffered actual damage
as a result of the use of the two form documents turns on individualized facts and
evidence. Because resolution of the issue of actual damages would require a
case-by-case analysis of each transaction, we cannot say that common questions of law or
fact predominate over individualized inquiries. The need for such individualized
inquiries precludes class certification under Civ.R. 23(B)(3). Felix at ¶ 34; Ford Motor
Credit Co. v. Agrawal, 8th Dist. Cuyahoga No. 103667, 2016-Ohio-5928, ¶ 26, 34
(finding class certification under Civ.R. 23(B)(3) was not proper because uniform
application of a “clean” standard and determination of the fact of injury to all lessees was
not susceptible to common class-wide proof); Blue Ash Auto, Inc., 8th Dist. Cuyahoga
Nos. 104251 and 104252, 2016-Ohio-7965, at ¶ 29-30 (finding denial of class
certification proper where resolution of the dispute would require a case-by-case analysis
of every repair conducted by each potential class member).
{¶19} Plaintiffs’ “benefit of the bargain” argument does not alter our analysis.
We also reject plaintiffs’ argument pertaining to a “document preparation fee,” which is
not related to the use of the CDA and RISC forms. As the court held in Felix, “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.” Felix at ¶ 36. In Felix,
the court found, under circumstances akin to this matter, as follows:
Here, the class, as certified, fails because there is no showing that all
class members suffered an injury in fact. The broadly defined class
encompasses consumers who purchased a vehicle at Ganley through a
purchase contract that contained the unconscionable arbitration provision.
But there is 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.
Felix at ¶ 37.
{¶20} Further, “a plaintiff seeking to certify a class based on allegedly common
documents and procedures must establish that the documents and procedures were, in
fact, uniformly applied to every potential class member.” Agrawal at ¶ 23, citing Cullen,
137 Ohio St.3d 373, 2013-Ohio-4733, 999 N.E.2d 614. Even the trial court
acknowledged that not all consumers who purchased a vehicle from defendants involving
the use of the RISC and CDA forms suffered damages. As defendants claim, “the
question whether the forms had any impact on any given transaction is highly variable
and individualized.” Purchasers might have purchased a different vehicle, put more
money down, obtained a co-signer, or revised the terms of their transaction. As in Felix,
because there is no class-wide proof of injury and actual damages arising as a result of the
use of the forms, there is no showing of predominance under Civ.R. 23(B)(3). See Felix,
145 Ohio St.3d 329, 2015-Ohio-3430, 49 N.E.3d 1224, at ¶ 35.
{¶21} The Ohio Supreme Court also has held that class certification under Civ.R.
23 is not proper when the class definition prevents class members from being identified
without expending more than a reasonable effort. Stammco, 125 Ohio St.3d 91,
2010-Ohio-1042, 926 N.E.2d 292, at ¶ 11 (finding certification improper where the trial
court would have to determine individually whether and how each prospective class
member had authorized third-party charges on his or her phone bill). Here, the trial court
would have to conduct a transaction-by-transaction inquiry into whether actual damages
were sustained. Therefore, plaintiffs also have failed to meet the first requirement of
Civ.R. 23 — that an identifiable class must exist and the definition of the class must be
unambiguous.
{¶22} Accordingly, we find the trial court abused its discretion in granting class
certification pursuant to Civ.R. 23(B)(3). We further find that the class definition does
not permit class members to be identified without expending more than a reasonable
effort. The assigned error is sustained, and we need not address the remaining arguments
raised.
{¶23} The trial court’s decision granting class certification is reversed. We
remand for further proceedings consistent with this opinion.
{¶24} Judgment reversed; case remanded.
It is ordered that appellees recover from appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the common pleas court to carry this
judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
SEAN C. GALLAGHER, JUDGE
MARY J. BOYLE, P.J., and
ANITA LASTER MAYS, J., CONCUR