Ellen Baskin v. P.C. Richard & Son, LLC (084257) (Ocean County & Statewide)

SYLLABUS
This syllabus is not part of the Court’s opinion. It has been prepared by the Office of the
Clerk for the convenience of the reader. It has been neither reviewed nor approved by the
Court. In the interest of brevity, portions of an opinion may not have been summarized.
Ellen Baskin v. P.C. Richard & Son, LLC (A-77-19) (084257)
Argued January 4, 2021 -- Decided May 5, 2021
FERNANDEZ-VINA, J., writing for the Court.
In this case, the Court considers whether plaintiffs, who suffered no actual harm
and are seeking statutory damages, sufficiently pled a class action against defendants for
noncompliance with the Fair and Accurate Credit Transactions Act of 2003 (FACTA)
such that their complaint should have survived a motion to dismiss under Rule 4:6-2(e).
Plaintiffs filed a putative class action on behalf of themselves and “[a]ll consumers
to whom [d]efendants, after November 17, 2013, provided an electronically printed
receipt” listing the expiration date of the consumer’s credit or debit card in violation of
FACTA. Plaintiffs’ only alleged injury was exposure to an increased risk of identity theft
and credit/debit card fraud. The complaint alleged that “there are, at a minimum,
thousands (i.e., two thousand or more) of members that comprise the Class.” The
complaint also noted that common questions -- including whether defendants’ receipts
violated FACTA, whether defendants’ conduct was willful, and whether the class is
entitled to damages -- predominated over any individual questions. It further alleged that
a class action is superior to other means of adjudicating these claims because the
prospective damages are too small to incentivize individual litigation and because
numerous small claims give rise to inconsistent results, redundancy, and delay. The
complaint sought an order certifying the class, as well as statutory and punitive damages
and costs and attorney’s fees.
The trial court granted defendants’ motion to dismiss plaintiffs’ complaint based
on its determination that plaintiffs could not satisfy Rule 4:32-1’s numerosity,
predominance, or superiority requirements for class certification. The Appellate Division
affirmed the dismissal as it pertained to the class action claims. 462 N.J. Super. 594, 619
(App. Div. 2020). The Court granted plaintiffs’ petition for certification pertaining to the
class certification issues. 242 N.J. 503 (2020).
HELD: Plaintiffs sufficiently pled the class certification requirements to survive a
motion to dismiss. The Court remands the matter for class action discovery to be
conducted pursuant to Rule 4:32-2(a) so that the trial court may determine whether to
certify the class.
1
1. A class action allows one or more individuals to act as plaintiff or plaintiffs in
representing the interests of a larger group of persons with similar claims. A class action
can create an incentive for individuals to band together when their claims in isolation are
too small to warrant recourse to litigation. The policy goals of judicial economy,
consistent treatment of class members, and protection of defendants from inconsistent
results are furthered through the class action device. Rule 4:32-1(a) requires a putative
class to satisfy four general prerequisites: (1) the class is so numerous that joinder of all
members is impracticable, (2) there are questions of law or fact common to the class, (3)
the claims or defenses of the representative parties are typical of the claims or defenses of
the class, and (4) the representative parties will fairly and adequately protect the interests
of the class. Plaintiffs pursuing class certification must also satisfy one of the three
requirements of Rule 4:32-1(b). Of importance to this case are the subsection (b)(3)
requirements, pursuant to which the court must “find[] that the questions of law or fact
common to the members of the class predominate over any questions affecting only
individual members, and that a class action is superior to other available methods for the
fair and efficient adjudication of the controversy.” (pp. 14-17)
2. Rule 4:32-1 does not specify a minimum number of class members necessary to
satisfy the numerosity requirement of subsection (a). New Jersey courts frequently
describe that requirement without numerical precision. To determine predominance
under Rule 4:32-1(b)(3), the court decides whether the proposed class is sufficiently
cohesive to warrant adjudication by representation. That determination requires an
assessment of various factors, including: the significance of the common questions;
whether the benefit of resolving common and presumably some individual questions
through a class action outweighs doing so through individual actions; and whether a class
action presents a common nucleus of operative facts. Whether a class action is superior
to individual actions or some other alternative procedure involves considerations of
fairness to the putative class members and the defendant, and the efficiency of one
adjudicative method over another. One factor that should be considered is whether any
one individual who has suffered a wrong will have the financial wherewithal or incentive
to prosecute a claim that might cost more than its worth. (pp. 17-21)
3. When FACTA was enacted in 2003, one of its purposes was to prevent criminals from
obtaining access to consumers’ private financial and credit information in order to reduce
identity theft and credit card fraud. FACTA prohibits any business that accepts credit or
debit cards from “print[ing] . . . the expiration date upon any receipt provided to the
cardholder at the point of the sale or transaction.” 15 U.S.C. § 1681c(g)(1). FACTA
imposes civil liability on persons or businesses that are negligently or willfully
noncompliant with its terms. If willfully noncompliant, as plaintiffs allege here, a
business will be subject to civil liability for “any actual damages sustained by the
consumer” or statutory damages ranging from $100 to $1,000; “punitive damages as the
court may allow”; and “the costs of the action together with reasonable attorney’s fees as
determined by the court.” 15 U.S.C. § 1681n(a)(1)(A), (a)(2), (a)(3). (pp. 22-23)
2
4. The Court applies the principles of Rule 4:32-1 to the FACTA claim alleged in
plaintiffs’ complaint while searching the complaint with liberality and giving plaintiffs
the benefit of every reasonable inference of fact therein. The Court finds plaintiffs’
allegation that there are a minimum of two thousand members of the class sufficient to
survive a motion to dismiss with respect to Rule 4:32-1(a)’s numerosity requirement.
That estimate is supported by the class period pled, which spanned two years and nine
months. In that time period, it is reasonable that the class could contain at minimum two
thousand members, given that anyone who received a noncompliant receipt from one of
defendants’ stores would be an eligible member. Absent discovery of defendants’ sales
records, plaintiffs have no way to know how many credit and debit card transactions
defendants conducted during the relevant period. (pp. 23-25)
5. The Court finds plaintiffs pled sufficient facts to withstand a motion to dismiss on the
issue of predominance at this stage because the class is seeking statutory damages. In
order to prove that defendants violated FACTA, plaintiffs must demonstrate that
defendants willfully printed receipts containing credit or debit card expiration dates. See
15 U.S.C. §§ 1681c(g)(1), 1681n. The common nucleus of operative facts is, as plaintiffs
pled, whether defendants programmed their equipment to print the expiration dates of
customers’ credit/debit cards on receipts; the answer to that question will apply to all
class members. If plaintiffs are successful in establishing defendants’ willful
noncompliance with FACTA, then statutory damages are available to all class members
uniformly. (pp. 25-26)
6. The Court concludes plaintiffs sufficiently pled superiority to survive a motion to
dismiss. Plaintiffs sufficiently addressed in their complaint considerations of fairness to
the parties and judicial efficiency, as well as of class members’ financial wherewithal or
incentive to pursue a claim that might cost more than its worth. FACTA’s willfulness
requirement makes it more difficult for an individual plaintiff to bring a FACTA claim
for statutory damages because it is unlikely a plaintiff appearing pro se in small claims
court will know how to demonstrate willfulness. Moreover, individual damages are
likely to be small and, as a result, individual class members are unlikely to have the
financial wherewithal or incentive to bring a claim. Additionally, if forced to proceed
individually, there is nothing stopping one attorney from bringing numerous plaintiffs
into small claims court and trying each claim one at a time. Such an approach would not
foster judicial efficiency; nor would it be fair to defendants, who could be exposed to
inconsistent results. Given those considerations, and at this stage of litigation before
discovery has been conducted, plaintiffs alleged sufficient facts to survive a motion to
dismiss on the question of superiority. (pp. 26-30)
REVERSED and REMANDED for further proceedings.
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, PATTERSON,
SOLOMON, and PIERRE-LOUIS join in JUSTICE FERNANDEZ-VINA’s opinion.
3
SUPREME COURT OF NEW JERSEY
A-77 September Term 2019
084257
Ellen Baskin, Kathleen O’Shea,
and Sandeep Trisal, on behalf
of themselves and all others
similarly situated,
Plaintiffs-Appellants,
v.
P.C. Richard & Son, LLC,
d/b/a P.C. Richard & Son,
and P.C. Richard & Son, Inc.,
d/b/a P.C. Richard & Son,
Defendants-Respondents.
On certification to the Superior Court,
Appellate Division, whose opinion is reported at
462 N.J. Super. 594 (App. Div. 2020).
Argued Decided
January 4, 2021 May 5, 2021
Chant Yedalian, of the California bar, admitted pro hac
vice, argued the cause for appellants (Lite DePalma
Greenberg and Chant & Company, attorneys; Bruce D.
Greenberg, and Chant Yedalian, on the briefs).
William S. Gyves argued the cause for respondents
(Kelley Drye & Warren, attorneys; William S. Gyves,
Glenn T. Graham, and Robert N. Ward, on the briefs).
1
Bruce H. Nagel argued the cause for amicus curiae New
Jersey Association for Justice (Nagel Rice, attorneys;
Bruce H. Nagel, of counsel and on the brief, and Randee
M. Matloff, on the brief).
JUSTICE FERNANDEZ-VINA delivered the opinion of the Court.
In this case, the Court considers whether plaintiffs sufficiently pled the
class certification requirements to survive a motion to dismiss under Rule 4:6-
2(e). Ellen Baskin, Kathleen O’Shea, and Sandeep Trisal (plaintiffs) filed a
class action complaint against defendants P.C. Richard & Son, LLC, and P.C.
Richard & Son, Inc., alleging defendants violated the Federal Fair and
Accurate Credit Transactions Act of 2003 (FACTA) by printing plaintiffs’
credit or debit card expiration dates on their receipts. Although plaintiffs did
not suffer identity theft, fraud, or third-party disclosure as a result of the
information on the receipts, they allege that defendants’ noncompliance with
FACTA has placed them at an increased risk of harm and seek statutory
damages.
FACTA prohibits any business that accepts credit or debit cards from
“print[ing] more than the last 5 digits of the card number or the expiration date
upon any receipt provided to the cardholder at the point of the sale or
transaction.” 15 U.S.C. § 1681c(g)(1). FACTA imposes civil liability on
businesses that are willfully noncompliant with its terms. Id. § 1681n. If
2
plaintiffs can establish defendants’ willful noncompliance, statutory damages
ranging from $100 to $1,000 will be awarded to each plaintiff. Id.
§ 1681n(a)(1)(A).
Defendants moved to dismiss plaintiffs’ complaint, arguing that
plaintiffs could not meet the superiority requirement for class certification
because statutory damages available under FACTA were sufficient to
incentivize individual actions. The trial court granted the motion, finding: (1)
plaintiffs failed to establish numerosity because they did not specify how many
members were in the class; (2) predominance was not satisfied because some
class members may have suffered actual damages and liability would therefore
have to be determined on a case-by-case basis; and (3) superiority was not
established because FACTA’s statutory award sufficiently incentivized
plaintiffs to bring suit individually. The Appellate Division affirmed the
dismissal as it pertained to the class action claims and to the individual claims
of O’Shea and Trisal; however, the appellate court reversed the dismissal of
Baskin’s individual claim.
In light of our standard of review at this stage, we disagree with the trial
and appellate courts and reverse the grant of defendants’ motion to dismiss.
Giving plaintiffs the benefit of all favorable inferences here, we find they
sufficiently pled the class certification requirements to survive a motion to
3
dismiss. Specifically, we conclude that: (1) an exact or specific number of
class members need not be pled to satisfy numerosity; (2) questions as to
whether defendants were willfully noncompliant with FACTA and
programmed their equipment to print credit or debit card expiration dates
predominated because plaintiffs are seeking only statutory and punitive
damages; and (3) the class action vehicle seems to be the superior means of
adjudicating plaintiffs’ claims because it is unlikely a plaintiff will have the
financial wherewithal to bring these claims individually in small claims court.
However, we are not certifying the class at this time. Instead, we are
remanding the matter for class action discovery to be conducted pursuant to
Rule 4:32-2(a) so that the trial court may determine whether to certify the
class.
I.
A.
In April 2018, plaintiffs Kathleen O’Shea and Sandeep Trisal, New York
residents, joined New Jersey resident Ellen Baskin to file this putative class
action in New Jersey state court on behalf of themselves and “[a]ll consumers
to whom [d]efendants, after November 17, 2013, provided an electronically
printed receipt” listing the expiration date of the consumer’s credit or debit
4
card in violation of FACTA. 1 Baskin alleged that on May 24, 2016, she
received a receipt containing her card’s expiration date from one of
defendant’s retail stores in Brick, New Jersey. Plaintiffs’ only alleged injury
was exposure to an increased risk of identity theft and credit/debit card fraud.
The complaint alleged that “there are, at a minimum, thousands (i.e., two
thousand or more) of members that comprise the Class,” and that “[t]he exact
size of the Class and identities of individual members thereof are ascertainable
through [d]efendants’ records.” The complaint also noted that common
questions -- including whether defendants’ receipts violated FACTA, whether
defendants’ conduct was willful, and whether the class is entitled to
damages -- predominated over any individual questions. It further alleged that
a class action is superior to other means of adjudicating these claims because
the prospective damages are too small to incentivize individual litigation and
because numerous small claims give rise to inconsistent results, redundancy,
1
In 2016, O’Shea and Trisal filed a similar class action complaint against
defendants in the Southern District of New York. O’Shea v. P.C. Richard &
Son, LLC, No. 15 Civ. 9069, 2017 U.S. Dist. LEXIS 122424, at *3-*6
(S.D.N.Y. Aug. 3, 2017). As part of that matter, O’Shea and Trisal alleged
defendants were aware of their noncompliance because, in 2015, O’Shea had
(a) served defendants with a cease-and-desist letter demanding defendants
update their printing practices to comply with FACTA and (b) attached a draft
complaint to the letter. Id. at *3-*4. Ultimately, the court granted defendants’
motion to dismiss because plaintiffs could not establish Article III standing.
Id. at *18.
5
and delay. The complaint sought an order certifying the class, as well as
statutory and punitive damages and costs and attorney’s fees.
In September 2018, defendants filed a motion to dismiss for failure to
state a claim upon which relief could be granted, arguing that plaintiffs had not
alleged they “sustained any ascertainable harm”; defendants also contended
that plaintiffs’ FACTA claims should not be litigated as a class action because
plaintiffs could not satisfy the superiority prong of Rule 4:32-1(b)(3).
Defendants argued, finally, that New Jersey courts lack personal jurisdiction
over O’Shea and Trisal’s New York-based claims. Plaintiffs opposed the
motion.
After hearing oral argument, the trial court issued a written opinion
granting defendants’ motion to dismiss based on its determination that
plaintiffs could not satisfy Rule 4:32-1’s numerosity, predominance, or
superiority requirements.
The trial court concluded that the numerosity requirement was not
satisfied because plaintiffs failed to allege a potential number of class
members “except to contend that there could be ‘thousands of people whose
credit card information was exposed on improper receipts.’”
The trial court held that predominance was not established because
plaintiffs’ failure to claim they suffered actual damages from identity theft or
6
credit/debit card fraud put their “claims at odds with the legislative purpose of
FACTA” and indicates “an overall lack of demonstrable damages” as to these
particular plaintiffs. Therefore, because other consumers who fall into the
proposed class may have actually been victims of identity theft or fraud, “[t]he
potential[ly] disparate nature of damages . . . require[s] courts to adjudicate
[d]efendants’ liability on a case-by-case basis,” which “cuts directly against
the purpose of Rule 4:32-1’s class certification predominance and superiority
prongs.”
The court determined that superiority was not established because
prevailing New Jersey law dictates that “adjudication of claims on an
individual basis in small claims court is ‘a far superior method to vindication
of any rights and protection of the public than any certification or class action’
in situations where a statutory damage award incentivizes a party to act in his
or her interest.” (quoting Local Baking Prods., Inc. v. Kosher Bagel Munch,
Inc., 421 N.J. Super. 268, 272 (App. Div. 2011)). The court then detailed the
process of filing an individual claim pro se in small claims court.
The court dismissed plaintiffs’ complaint for failure to satisfy the
requirements of class certification. The court also concluded that it did not
have personal jurisdiction over O’Shea and Trisal’s claims.
7
B.
The Appellate Division, in a published opinion, affirmed the trial court’s
denial of class certification and dismissal of the complaint as it pertained to
O’Shea and Trisal, but it reversed the dismissal of Baskin’s claim, remanding
it to be reinstated as an individual action. Baskin v. P.C. Richard & Son, LLC,
462 N.J. Super. 594, 619 (App. Div. 2020).
The Appellate Division concluded that numerosity had not been satisfied
because plaintiffs “failed to sufficiently articulate the size of the class”
because they did not “name the number of potential class members, and only
vaguely stated that there could be ‘thousands of people whose credit card
information was exposed on improper receipts.’” Id. at 607-08.
The court likewise held that plaintiffs failed to allege facts sufficient to
establish predominance, noting that “the sheer amount of uncertainties in
respect of the amount of potential FACTA claims against defendants, and any
harm that arose from such violations, renders it difficult to determine a
common nucleus of operative facts.” Id. at 615.
Regarding superiority, the court determined plaintiffs failed to make a
prima facie showing that a class action was superior to individual actions in
small claims court. Id. at 601, 608-13. The Appellate Division relied upon the
reasoning of Local Baking and the dismissal of O’Shea and Trisal’s New York
8
action when assessing whether plaintiffs met the superiority requirement. Id.
at 608-13.
We granted plaintiffs’ petition for certification pertaining to the class
certification issues. 242 N.J. 503 (2020). We also granted the New Jersey
Association for Justice’s (NJAJ) motion to appear as amicus curiae.
II.
A.
Plaintiffs assert the trial and appellate courts imposed three barriers to
class certification at the pleading stage, each of which on its own has the effect
of precluding class action lawsuits in this State. Those barriers concern the
numerosity, predominance, and superiority requirements of Rule 4:32-1.
Plaintiffs submit that they more than adequately pled numerosity in their
complaint by alleging “that there are, at a minimum, thousands (i.e., two
thousand or more) of members that comprise the class” given that the class
period pled was a span of two years and nine months. Plaintiffs argue that by
refusing to certify the class because plaintiffs failed to state the size of the
proposed class with specificity, the trial and appellate courts created a new
pleading requirement that contravenes this Court’s decision in Lee v. Carter-
Reed Co., L.L.C., 203 N.J. 496, 505 (2010).
9
Next, plaintiffs note that predominance was also determined sua sponte
by the trial and appellate courts. They argue this case is ideal for class
treatment because the major question that predominates is whether defendants
programmed their equipment to print expiration dates on customer receipts ,
willfully or not -- a question whose answer will not vary from one class
member to the next. Relying on Delgozzo v. Kenny, 266 N.J. Super. 169, 190
(App. Div. 1993), plaintiffs assert that class certification can still be
appropriate even if individual damages need to be calculated as long as
“common questions as to liability predominate.” They add that potential class
members who may have incurred actual damages as a result of defendants’
actions can opt out of the class.
Regarding superiority, plaintiffs take issue with the trial and appellate
courts’ conclusion that because statutory damages are recoverable in small
claims court, a class action cannot be a superior method of enforcement.
Plaintiffs argue that the trial and appellate courts’ and defendants’ reliance on
Local Baking for that proposition is misplaced because that case dealt with a
narrow issue involving the Telephone Consumer Protection Act (TCPA) of
1991, 47 U.S.C. § 227. Plaintiffs distinguish the TCPA claims in Local
Baking from the FACTA claims here, pointing to the differences between the
10
elements of the respective claims and between the legislative histories of both
Acts.
Additionally, plaintiffs rely on United Consumer Financial Services Co.
v. Carbo, 410 N.J. Super. 280, 295 (App. Div. 2009), to support their position
that a class action is superior here because, although there are numerous
claims, any individual’s recovery would likely be small. Plaintiffs also note
the Carbo court specifically addressed and rejected defendants’ argument
regarding superiority and statutory violations for which a statutory civil
penalty is available.
Plaintiffs further argue that small claims court is not an appropriate or
superior method of adjudicating FACTA claims because it does not allow the
extensive discovery needed to prove a willful violation and because successful
plaintiffs may be entitled to damages and attorneys’ fees that exceed the
$3,000 jurisdictional limit of small claims court.
B.
Amicus NJAJ aligns itself with plaintiffs and emphasizes that “the class
action rule should be liberally construed.” Applying traditional principles of
liberal construction, NJAJ argues, a motion court is required to meticulously
search the pleadings to find even a suggested cause of action when a motion to
dismiss on the pleadings is filed; if a suggested cause of action cannot be
11
found, NJAJ adds, then leave to amend should be granted. NJAJ reiterates
plaintiffs’ arguments that the trial and appellate courts effectively ended
plaintiffs’ class action claims when they sua sponte “expanded the grounds of
dismissal to include pleading deficiencies on the issues of numerosity and
predominance.”
C.
Defendants contend that, because numerosity was not at issue in Lee,
plaintiffs’ argument that the Appellate Division’s holding on numerosity is in
conflict with that decision cannot be correct. With respect to predominance,
defendants argue plaintiffs mischaracterize the holding in Delgozzo and rely
on dicta. Specifically, defendants note the predominance issue in Delgozzo
involved conflict-of-law considerations that are not present here; thus, in
defendants’ view, there is no intersection between Delgozzo and the holdings
in this case.
Defendants’ main argument concerns superiority. They argue that,
contrary to plaintiffs’ claims, the trial and appellate decisions here did not
have the broad effect of barring class actions for claims involving statutory
damages. Relying on Local Baking, defendants argue that FACTA provides
for a statutory remedy that is sufficient to incentivize an individual to act in his
or her own interest. Defendants also argue plaintiffs misread Carbo because
12
the argument rejected there is not the same as the argument defendants make
here -- that FACTA’s statutory remedy sufficiently incentivizes an aggrieved
consumer to bring a claim individually.
Defendants assert that extensive discovery is not needed here because
willfulness under FACTA does not require proof of defendants’ subjective bad
faith or intent; rather, claims for statutory damages under FACTA require only
that plaintiffs present the court with a noncompliant receipt and prove
defendants had some knowledge of FACTA to receive statutory damages.
Thus, defendants assert, plaintiffs’ FACTA claims are not so complex that they
cannot be addressed in small claims court.
Lastly, defendants contend that the small claims court’s $3,000
jurisdictional cap would cover any damages and attorneys’ fees, adding that,
should the cap be surpassed, plaintiffs could then file, in or seek to be removed
to, the Law Division.
III.
The issue presented by this appeal is whether plaintiffs, who suffered no
actual harm and are seeking statutory damages, sufficiently pled a class action
against defendants for noncompliance with FACTA such that their complaint
should have survived a motion to dismiss under Rule 4:6-2(e).
13
Rule 4:6-2(e) motions to dismiss for failure to state a claim upon which
relief can be granted are reviewed de novo. Dimitrakopoulos v. Borrus,
Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., 237 N.J. 91, 108 (2019). A
reviewing court must examine “the legal sufficiency of the facts alleged on the
face of the complaint,” giving the plaintiff the benefit of “every reasonable
inference of fact.” Id. at 107 (quoting Printing Mart-Morristown v. Sharp
Elecs. Corp., 116 N.J. 739, 746 (1989)). The complaint must be searched
thoroughly “and with liberality to ascertain whether the fundament of a cause
of action may be gleaned even from an obscure statement of claim, opportunity
being given to amend if necessary.” Printing Mart, 116 N.J. at 746 (quoting Di
Cristofaro v. Laurel Grove Mem’l Park, 43 N.J. Super. 244, 252 (App. Div.
1957)). “Nonetheless, if the complaint states no claim that supports relief, and
discovery will not give rise to such a claim, the action should be dismissed.”
Dimitrakopoulos, 237 N.J. at 107.
IV.
A.
With that standard in mind, we turn to the principles of class
certification. A class action allows “one or more individuals to act as plaintiff
or plaintiffs in representing the interests of a larger group of persons with
similar claims.” Lee, 203 N.J. at 517. A class action can create an incentive
14
for a large number of individuals who may have similar valid claims to “band
together” when “those claims in isolation are ‘too small . . . to warrant
recourse to litigation.’” Ibid. (omission in original) (quoting In re Cadillac
V8-6-4 Class Action, 93 N.J. 412, 435 (1983)). That is especially true when
the alleged perpetrator of the wrong is a “corporate entity that wields
enormous economic power”; by allowing plaintiffs to “band together,” class
actions can level the playing field and “thus provid[e] ‘a procedure to remedy
a wrong that might otherwise go unredressed.’” Id. at 517-18 (quoting In re
Cadillac, 93 N.J. at 424). Put simply, the class action device permits “‘an
otherwise vulnerable class’ of diverse individuals with small claims access to
the courthouse.” Id. at 518 (quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J.
88, 120 (2007)).
Additionally, the policy goals of “judicial economy,” “consistent
treatment of class members,” and “protection of defendants from inconsistent
[results]” are furthered through the class action device. Ibid. (alteration in
original) (quoting Iliadis, 191 N.J. at 104). Accordingly, “a court should be
slow to hold that a suit may not proceed as a class action” and should rarely
deny a class action based on the face of the complaint. Riley v. New Rapids
Carpet Ctr., 61 N.J. 218, 228 (1972). That said, pre-discovery dismissal of a
class action is permitted if the court determines that discovery would not
15
provide a basis for relief. See Myska v. N.J. Mfrs. Ins. Co., 440 N.J. Super.
458, 473-81 (App. Div. 2015) (affirming pre-discovery dismissal because the
plaintiffs’ claims depended on non-uniform contracts between each plaintiff
and the defendant, as well as on steps taken by each plaintiff leading up to the
defendant’s alleged breach).
Rules 4:32-1 and -2 govern class actions in New Jersey. Rule 4:32-1
sets forth the requirements for maintaining a class action. Subsection (a) of
that rule requires a putative class to satisfy four general prerequisites in order
to sue as a class:
(1) the class is so numerous that joinder of all members
is impracticable, (2) there are questions of law or fact
common to the class, (3) the claims or defenses of the
representative parties are typical of the claims or
defenses of the class, and (4) the representative parties
will fairly and adequately protect the interests of the
class.
[R. 4:32-1(a).]
Those prerequisites are “frequently termed ‘numerosity, commonality,
typicality and adequacy of representation.’” Dugan v. TGI Fridays, Inc., 231
N.J. 24, 47 (2017) (quoting Lee, 203 N.J. at 519).
In addition to the prerequisites of subsection (a), plaintiffs pursuing class
certification must also satisfy one of the three requirements of subsection (b).
16
Of importance to this case are the subsection (b)(3) requirements, pursuant to
which the court must
find[] that the questions of law or fact common to the
members of the class predominate over any questions
affecting only individual members, and that a class
action is superior to other available methods for the fair
and efficient adjudication of the controversy. The
factors pertinent to the findings include:
(A) the interest of members of the class in
individually controlling the prosecution or
defense of separate actions;
(B) the extent and nature of any litigation
concerning the controversy already commenced
by or against members of the class;
(C) the desirability or undesirability in
concentrating the litigation of the claims in the
particular forum; and
(D) the difficulties likely to be encountered in the
management of a class action.
[R. 4:32-1(b)(3).]
1.
Rule 4:32-1 does not specify a minimum number of class members
necessary to satisfy the numerosity requirement of subsection (a). Federal
courts deciding class certification issues governed by Federal Rule of Civil
Procedure 23(a), the Federal Class Action Rule -- which served as the model
for Rule 4:32-1, see In re Cadillac, 93 N.J. at 424-25 -- have stated that
17
“[t]here is no set numerical cutoff used to determine whether a class is
sufficiently numerous; courts must examine the specific facts of each case to
evaluate whether the requirement has been satisfied.” In re Toys “R” Us, 300
F.R.D. 347, 367 (C.D. Cal. 2013). However, “[a]s a general rule . . . classes of
20 are too small, classes of 20-40 may or may not be big enough depending on
the circumstances of each case, and classes of 40 or more are numerous
enough.” Id. at 367-68 (quoting Ikonen v. Hartz Mountain Corp., 122 F.R.D.
258, 262 (S.D. Cal. 1988)).
New Jersey courts frequently describe the numerosity requirement
without numerical precision. See Dugan, 231 N.J. at 64-65 & n.12
(concluding that the proposed class of 263,000 “clearly includes numerous
claimants”); Lee, 203 N.J. at 512 (determining that the trial court described the
class as sufficiently numerous because it included “well over 10,000
members”); In re Cadillac, 93 N.J. at 425 (affirming the trial court’s finding
that “[a] class of approximately 7,500 plaintiffs is sufficiently numerous”).
2.
“To determine predominance under Rule 4:32-1(b)(3), the court decides
‘whether the proposed class is “sufficiently cohesive to warrant adjudication
by representation.”’” Dugan, 231 N.J. at 48 (quoting Iliadis, 191 N.J. at 108).
That determination requires
18
a court [to] conduct a “pragmatic assessment” of
various factors. One inquiry is the significance of the
common questions. That inquiry involves a qualitative
assessment of the common and individual questions
rather than a mere mathematical quantification of
whether there are more of one than the other. The
second inquiry is whether the “benefit” of resolving
common and presumably some individual questions
through a class action outweighs doing so through
“individual actions.” A third inquiry is whether a class
action presents a “common nucleus of operative facts.”
[Lee, 203 N.J. at 519-20 (citations omitted) (quoting
Iliadis, 191 N.J. at 108).]
The predominance prong is “‘far more demanding’ than Rule 4:32-1(a)(2)’s
requirement that there be questions of law or fact common to the class.”
Dugan, 231 N.J. at 48 (quoting Castro v. NYT Television, 384 N.J. Super. 601,
608 (App. Div. 2006)). “Significantly,” however, “to establish predominance,
plaintiff does not have to show that there is an ‘absence of individual issues or
that the common issues dispose of the entire dispute,’ or ‘that all issues [are]
identical among class members or that each class member [is] affected in
precisely the same manner.’” Lee, 203 N.J. at 520 (alterations in original)
(quoting Iliadis, 191 N.J. at 108-09).
Class certification is not necessarily precluded when individual class
members’ degree of damages will require individualized proof. See Delgozzo,
266 N.J. Super. at 181 (“[I]t is clear that New Jersey courts will permit class
certification even though individual questions, such as the degree of damages
19
due a particular class member, . . . may remain following resolution of the
common questions.” (citing In re Cadillac, 93 N.J. at 429-30)). Additionally,
a proposed class may limit how individualized questions about the type or
extent of harm suffered by individual class members will factor into the
predominance and superiority assessments by limiting the relief sought to a
type that will not be affected by the resolution of individualized questions.
See id. at 187 (“[P]laintiffs assert that they seek only economic damages,
correctly noting that class members who have also suffered personal injuries as
a result of using defendants’ product may, if warranted, opt out and proceed
independently on those issues. In re Cadillac lends support to the position that
a class may be certified where individual members of the class may have
suffered personal injury.”).
3.
“A class action plaintiff must also demonstrate that ‘a class action is
superior to other available methods for the fair and efficient adjudication of the
controversy.’” Dugan, 231 N.J. at 49 (quoting R. 4:32-1(b)(3)). “By
definition, ‘superior’ implies a comparison with alternative procedures such as
a test case or joinder of claims.” In re Cadillac, 93 N.J. at 436. “Whether a
class action is superior to thousands of minor, individual actions or some other
‘alternative procedure[]’ involves considerations of fairness to the putative
20
class members and the defendant, and the ‘efficiency’ of one adjudicative
method over another.” Lee, 203 N.J. at 520 (alteration in original) (quoting In
re Cadillac, 93 N.J. at 436).
One factor that should be considered in a fairness determination is
“whether any one individual who has suffered a wrong will have the financial
wherewithal or incentive to prosecute a claim that might cost more than its
worth.” Ibid.; accord Int’l Union of Operating Eng’rs Local No. 68 Welfare
Fund v. Merck & Co., Inc., 192 N.J. 372, 384 (2007) (“[I]n Iliadis, we
identified as important to the superiority analysis a consideration of the class
members’ lack of financial wherewithal. In such circumstances, we have
expressed a concern that, absent a class, the individual class members would
not pursue their claims at all, thus demonstrating superiority of the class action
mechanism.” (citations and internal quotation marks omitted)); see also In re
Cadillac, 93 N.J. at 436-37 (affirming the trial court’s determination that a
class action was superior to a test case in that matter because resolution of
issues common to the class would “require substantial discovery, expert
testimony, and trial time, all of which would render uneconomical an
individual suit by a single disgruntled customer”).
In Carbo, the Appellate Division considered a challenge to class
certification after the class was awarded a civil penalty of $100 for each
21
member, attorney’s fees, and costs under the Truth-in-Consumer Contract,
Warranty and Notice Act (TCCWNA). 410 N.J. Super. at 292. The court
rejected the defendants’ argument that a class action is not superior to
individual actions when plaintiffs are seeking statutory damages. Id. at 308.
The court affirmed class certification, noting that “Rule 4:32-1 must be
liberally construed, and a class action is the favored means of adjudicating
numerous claims involving a common nucleus of facts for which each
individual’s recovery will be small.” Id. at 295.
B.
When FACTA was enacted in 2003, one of its purposes was “to prevent
criminals from obtaining access to consumers’ private financial and credit
information in order to reduce identity theft and credit card fraud.” Credit and
Debit Card Receipt Clarification Act of 2007, Pub. L. No. 110-241, § 2(a)(1),
121 Stat. 1565 (2008). As noted, FACTA prohibits any business that accepts
credit or debit cards from “print[ing] more than the last 5 digits of the card
number or the expiration date upon any receipt provided to the cardholder at
the point of the sale or transaction.” 15 U.S.C. § 1681c(g)(1).
FACTA imposes civil liability on persons or businesses that are
negligently or willfully noncompliant with its terms. See 15 U.S.C. §§ 1681n,
1681o. If negligently noncompliant, a business will be subject to civil liability
22
to the consumer for actual damages, costs, and attorney’s fees. 15 U.S.C.
§ 1681o(a). If willfully noncompliant, as plaintiffs allege here, a business will
be subject to civil liability for “any actual damages sustained by the consumer
as a result of the failure or damages of not less than $100 and not more than
$1,000”; “punitive damages as the court may allow”; and “the costs of the
action together with reasonable attorney’s fees as determined by the court.” 15
U.S.C. § 1681n(a)(1)(A), (a)(2), (a)(3).
V.
We now apply the principles of Rule 4:32-1 to the FACTA claim alleged
in plaintiffs’ complaint while searching the complaint with liberality “to
ascertain whether the fundament of a cause of action may be gleaned,” Printing
Mart, 116 N.J. at 746 (quoting Di Cristofaro, 43 N.J. Super. at 252), and
giving plaintiffs the benefit of “every reasonable inference of fact” therein,
Dimitrakopoulos, 237 N.J. at 107 (quoting Printing Mart, 116 N.J. at 746).
The Appellate Division affirmed the trial court’s grant of defendants’ motion
to dismiss based on plaintiffs’ alleged failure to satisfy the numerosity,
predominance, and superiority requirements. We disagree and find that
plaintiffs sufficiently pled those requirements to survive a motion to dismiss.
23
A.
Both the trial court and the Appellate Division concluded plaintiffs did
not satisfy the numerosity requirement of Rule 4:32-1(a) because they failed to
specify the number of class members except for saying that there “could be”
thousands. However, that misstates plaintiffs’ allegations in their complaint.
Plaintiffs did not allege that there “could be” thousands of members, rather
they alleged that “there are, at a minimum, thousands (i.e., two thousand or
more) of members that compromise the Class”; plaintiffs also stated that “[t]he
exact size of the Class and identities of individual members thereof are
ascertainable through [d]efendants’ records.” (emphasis added). The trial and
appellate courts’ determination that the class was not pled with specificity is
inconsistent with our standard of review, which requires us to give plaintiffs
the benefit of “every reasonable inference of fact.” Dimitrakopoulos, 237 N.J.
at 107 (quoting Printing Mart, 116 N.J. at 746).
Giving the plaintiffs that benefit here requires us to accept as true
plaintiffs’ allegation that there are a minimum of two thousand members of the
class. That estimate is also supported by the class period pled, which spanned
two years and nine months. In that time period, it is reasonable that the class
could contain at minimum two thousand members, given that anyone who
received a noncompliant receipt from one of defendants’ stores would be an
24
eligible member. Additionally, absent discovery of defendants’ sales records,
plaintiffs have no way to know how many credit and debit card transactions
defendants conducted during the relevant period.
Therefore, because plaintiffs have not had the benefit of discovery, we
find that their allegation that “there are, at a minimum, thousands (i.e., two
thousand or more)” of class members is sufficient to survive a motion to
dismiss with respect to Rule 4:32-1(a)’s numerosity requirement.
B.
The trial court and Appellate Division determined that plaintiffs failed to
satisfy the predominance requirement of Rule 4:32-1(b)(3) because there were
too many uncertainties regarding the number of claims and the harm suffered;
thus, it was “difficult to determine a common nucleus of operative facts.” We
disagree and find plaintiffs pled sufficient facts to withstand a motion to
dismiss on the issue of predominance at this stage because the class is seeking
statutory damages.
In order to prove that defendants violated FACTA, plaintiffs must
demonstrate that defendants willfully printed receipts containing credit or debit
card expiration dates. See 15 U.S.C. §§ 1681c(g)(1), 1681n. Accordingly, the
common nucleus of operative facts is, as plaintiffs pled, whether defendants
programmed their equipment to print the expiration dates of customers’
25
credit/debit cards on receipts; the answer to that question will apply to all class
members. Put differently, if plaintiffs are successful in establishing
defendants’ willful noncompliance with FACTA, then statutory damages are
available to all class members uniformly.
Accepting as true plaintiffs’ allegations that defendants’ noncompliance
was a consistent result of how their receipt-printing equipment was
programmed, the significant questions of defendants’ conduct and willfulness
present a common nucleus of operative facts. See Iliadis, 191 N.J. at 108.
Resolving those questions as a class offers the benefit of consistency. See Lee,
203 N.J. at 520.
Therefore, we disagree with the trial court and Appellate Division’s
conclusion that there are too many “uncertainties” to “determine a common
nucleus of operative facts.” We instead find that plaintiffs pled sufficient facts
to survive a motion to dismiss on the question of predominance.
C.
The trial court and Appellate Division, relying on Local Baking, found
plaintiffs did not satisfy the superiority requirement of Rule 4:32-1(b)(3) and
that filing individual claims in small claims court would be a superior method
of adjudicating plaintiffs’ FACTA claims. We disagree and find this reliance
on Local Baking misplaced. Giving plaintiffs the benefit of every inference of
26
fact, we conclude they sufficiently pled superiority to survive a motion to
dismiss.
Determining superiority necessarily involves a comparison of alternative
procedures. In re Cadillac, 93 N.J. at 436. That comparison involves
considerations of fairness to the parties and judicial efficiency , as well as of
class members’ financial wherewithal or incentive to pursue “a claim that
might cost more than its worth.” Lee, 203 N.J. at 520. Plaintiffs sufficiently
addressed those considerations in their complaint. See Dugan, 231 N.J. at 49
(noting that class action plaintiffs bear the burden to “demonstrate that ‘a class
action is superior to other available methods for the fair and efficient
adjudication of the controversy’” (quoting R. 4:32-1(b)(3))).
Plaintiffs alleged in their complaint that a class action is superior
because individual statutory damages will be relatively small; thus, “the
expense and burden of individual litigation makes it economically infeasible
and procedurally impracticable for each [class member] to individually seek
redress for the wrongs done to them.” They further allege it is unlikely that
individual class members will bring FACTA claims and that, even if individual
litigation were brought, the class action is still superior because individual
claims would “present the potential for varying, inconsistent or contradictory
judgments and would increase the delay and expense to all parties and the
27
court system resulting from multiple trials of the same factual issues.” Th ose
allegations are sufficient to establish superiority at the pre-discovery motion to
dismiss stage. See Carbo, 410 N.J. Super. at 295 (“Rule 4:32-1 must be
liberally construed, and a class action is the favored means of adjudicating
numerous claims involving a common nucleus of facts for which each
individual’s recovery will be small.”).
The trial court and Appellate Division, relying on Local Baking,
determined that superiority was not established because, like the statutory
award of $500 in TCPA claims, FACTA’s statutory penalty of $100 to $1 ,000
sufficiently incentivized individual plaintiffs to bring claims. However, the
reliance on Local Baking is misplaced because of the differences in
establishing a statutory violation under the TCPA and establishing a statutory
violation under FACTA. For example, pursuant to the TCPA, “[a] person or
entity may . . . bring in an appropriate court of that State -- an action . . . to
receive $500 in damages for each such violation.” 47 U.S.C. § 227(b)(3)(B).
Pursuant to FACTA, statutory damages ranging from $100 to $1,000 will be
awarded if plaintiffs can establish defendants’ noncompliance with FACTA
was willful or negligent. See 15 U.S.C. §§ 1681n, 1681o. The significant
difference between the two Acts is FACTA’s willfulness requirement. The
imposition of the willfulness requirement makes it more difficult for an
28
individual plaintiff to bring a FACTA claim for statutory damages because it is
unlikely a plaintiff appearing pro se in small claims court will know how to
demonstrate willfulness.
Moreover, as plaintiffs pled, individual damages are likely to be small
and, as a result, individual class members are unlikely to have the financial
wherewithal or incentive to bring a claim. See Int’l Union of Operating Eng’rs
Local No. 68 Welfare Fund, 192 N.J. at 384 (noting the concern that, when
class members lack the financial wherewithal to bring a claim, “absent a class,
the individual class members would not pursue their claims at all, thus
demonstrating superiority of the class action mechanism”).
Additionally, trying these cases individually could result in inconsistent
verdicts. In fact, if forced to proceed individually, there is nothing stopping
one attorney from bringing numerous plaintiffs into small claims court and
trying each claim one at a time. Such an approach would not foster judicial
efficiency; nor would it be fair to defendants, who could be exposed to
inconsistent results.
Rule 4:32-2(a) provides that,
[w]hen a person sues or is sued as a representative of a
class, the court shall, at an early practicable time,
determine by order whether to certify the action as a
class action. An order certifying a class action shall
define the class and the class claims, issues or defenses,
and shall appoint class counsel in accordance with
29
paragraph (g) of this rule. The order may be altered or
amended prior to the entry of final judgment.
Class action discovery must be undertaken so that the court has the
information necessary to allow it to determine whether the class should be
certified.
Given those considerations, and at this stage of litigation before
discovery has been conducted, plaintiffs alleged sufficient facts to survive a
motion to dismiss on the question of superiority.
VI.
In sum, we reverse the judgment of the Appellate Division and hold that
plaintiffs sufficiently pled facts regarding Rule 4:32-1’s numerosity,
predominance, and superiority requirements to survive a motion to dismiss.
However, we are not certifying the class. We remand the matter for the parties
to conduct discovery related to class action certification.
CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN,
PATTERSON, SOLOMON, and PIERRE-LOUIS join in JUSTICE
FERNANDEZ-VINA’s opinion.
30