Williams v. Kisling, Nestico, & Redick, L.L.C.

[Cite as Williams v. Kisling, Nestico, & Redick, L.L.C., 2022-Ohio-1044.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
MEMBER WILLIAMS, et al. C.A. Nos. 29630
29636
Appellees
v.
APPEAL FROM JUDGMENT
KISLING, NESTICO, & REDICK, LLC., et ENTERED IN THE
al. COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellants CASE No. CV-2016-09-3928
DECISION AND JOURNAL ENTRY
Dated: March 30, 2022
CARR, Judge.
{¶1} Appellants, Dr. Sam Ghoubrial and the law firm of Kisling, Nestico, and Redick
(“KNR”), appeal the judgment of the Summit County Court of Common Pleas. This Court affirms
in part and reverses in part.
I.
{¶2} The instant appeal arises out of a class action lawsuit alleging unlawful business
practices by KNR and several healthcare providers. The trial court ultimately certified two classes
pursuant to Civ.R. 23, one involving an alleged price-gouging scheme and the other involving an
alleged bogus investigation fee charged by KNR.
{¶3} This matter was pending in the Summit County Court of Common Pleas for several
years before the sixth amended complaint was filed with leave of court in 2019. A number of
defendants and claims were added as the litigation progressed over time. In the sixth amended
complaint, the named class representatives were Member Williams, Thera Reid, Monique Norris,
2
and Richard Harbour, all of whom were KNR clients who sought treatment from healthcare
providers recommended by the firm. The named defendants were Dr. Ghoubrial, Dr. Minas Floros,
and KNR, as well as Alberto Nestico and Robert Redick in their capacities as owners of KNR. Dr.
Ghoubrial is a medical doctor who operates a pain management clinic. Dr. Floros is a chiropractor
who frequently treats individuals involved in car accidents. KNR is a law firm with a large
personal injury practice.
{¶4} The sixth amended complaint alleged three fraudulent schemes perpetrated by
KNR.
{¶5} The first set of claims involved an alleged price-gouging scheme between KNR and
certain healthcare providers. Specifically, the plaintiffs sought to pursue claims of fraud, breach
of fiduciary duty, unjust enrichment, unconscionable contract, and violations of the Ohio Corrupt
Practices Act on behalf of KNR clients who were allegedly charged “exorbitantly inflated prices
for medical treatment and equipment provided by KNR’s ‘preferred’ healthcare providers pursuant
to a price-gouging scheme by which the clients were pressured into waiving insurance benefits
that would have otherwise protected them[.]” The named plaintiffs for these claims were Reid,
Norris, and Harbour, in addition to Class A.
{¶6} The second set of claims involved an allegedly fraudulent charge imposed on KNR
clients that served as a kickback to chiropractors in KNR’s referral network. The plaintiffs sought
to pursue claims of fraud, breach of fiduciary duty, and unjust enrichment on behalf of KNR clients
who were allegedly charged “a sham narrative fee that KNR paid as a kickback to select
chiropractors as compensation for referrals and participation in the price-gouging scheme[.]” The
named plaintiffs for these claims were Reid and Norris, in addition to Class B.
3
{¶7} The third set of claims involved an allegedly bogus fee charged to KNR clients for
investigative services. The plaintiffs sought to pursue claims of fraud, breach of contract, breach
of fiduciary duty, and unjust enrichment on behalf of former KNR clients who were allegedly
charged “a bogus ‘investigation’ fee deducted from their settlement to pay so-called ‘investigators’
whose job was primarily to chase new clients down to sign them up before they could sign with a
competing firm.” The named plaintiffs for these claims were Williams, Reid, Norris, Harbour, in
addition to Class C.
{¶8} With respect to the definition of classes pursuant to Civ.R. 23, the plaintiffs sought
to certify the following three classes:
[Class A]
All current and former KNR clients who had deducted from their settlements any
fees paid to Defendant Ghoubrial’s personal-injury clinic for trigger-point
injections, TENS units, back braces, kenalog, or office visits, billed pursuant to the
clinic’s standard rates from the date of its founding in 2010 through the present.
[Class B]
All current and former KNR clients who had deducted from their settlements a
narrative fee paid to (1) Dr. Minas Floros of Akron Square Chiropractic, (2) all
other chiropractors employed at clinics owned by Michael Kent Plambeck, and (3)
certain other chiropractors identified in KNR documents as “automatic” recipients
of the fee, from KNR’s founding in 2005 to the present.
[Class C]
All current and former KNR clients to whom KNR charged sign-up fees paid to
AMC Investigations, Inc., MRS Investigations, Inc., or any other so called
“investigators” or “investigation” company, from 2008 to the present.
{¶9} The defendants denied the allegations in their respective answers and asserted a
number of affirmative defenses. The parties submitted a bevy of evidence and engaged in
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extensive briefing on the plaintiffs’ motion for class certification. The trial court permitted
supplemental briefing on several issues and held oral arguments.1
{¶10} On December 17, 2020, the trial court issued a journal entry granting the motion to
certify in part and denying it in part. As to Class A, the trial court found that the claims of fraud,
breach of fiduciary duty, unjust enrichment, and unconscionable contract “are appropriate claims
for class action against all Defendants except [Dr.] Floros, and the breach of fiduciary duty claim
as to Dr. Ghoubrial.” The trial court also found there was no evidence to support the claim alleging
violations of the Ohio Corrupt Practices Act claim against any defendant named in regard to Class
A. The trial court denied the motion to certify as it pertained to Class B. The trial court granted
the motion to certify Class C against KNR, and its individually named owners.
{¶11} KNR has appealed and raises two assignments of error. Dr. Ghoubrial raises one
assignment of error. This Court consolidates certain assignments of error to facilitate review
II.
BACKGROUND
{¶12} One of the foundational allegations underpinning the plaintiffs’ claims is that KNR
functions as a settlement mill, a type of law firm that grew in prominence after the United States
Supreme Court held that rules restricting the advertisement of legal services were unconstitutional
in Bates v. State Bar of Arizona, 433 U.S. 350, 383 (1977). The plaintiffs attached to their
complaint an affidavit from Nora Freeman Engstrom, a Stanford Law School professor who
specializes in legal ethics and tort law. Professor Engstrom averred that “[s]ettlement mills are:
(1) high-volume personal-injury law practices, that (2) engage in
1
The process of briefing the motion for class certification commenced prior to the time
that the trial court granted leave to file the sixth amended complaint.
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aggressive advertising from which they obtain a high proportion of their clients, (3) epitomize
‘entrepreneurial legal practices,’ and (4) take few, if any, cases to trial.” In addition to these core
characteristics, Professor Engstrom further explained that “settlement mills tend to, but do not
always: (5) charge tiered contingency fees; (6) fail to engage in rigorous case screening and thus
primarily represent accident victims with low-dollar (often, soft-tissue injury) claims; (7) fail to
prioritize meaningful attorney-client interaction; (8) incentivize settlements via mandatory quotas
imposed on their employees or by offering negotiators awards or fee-based compensation; (9)
resolve cases quickly, usually within two-to-eight months of the accident; and (10) rarely file
lawsuits.” Professor Engstrom also discussed the predicament of “[m]edical buildup” in cases
handled by settlement mills, a practice by which injuries are exaggerated and overtreated in order
to increase the value of a case.
{¶13} Professor Engstrom averred that based on her review of the deposition testimony
given in this case, KNR fits within the definition of a settlement mill. Professor Engstrom cited a
number of factors in reaching this conclusion, noting that KNR maintains an extraordinary case
load, spends a large amount of money on advertising, takes comparatively few cases to trial while
strongly encouraging settlements, and approaches the practice of law from an entrepreneurial
perspective. Several of the secondary factors were present as well, according to Professor
Engstrom. KNR charges clients via contingency fees, though the firm does not maintain a tiered
contingency fee system. Professor Engstrom observed that KNR’s case screening is less than
rigorous and the firm primarily represents accident victims with soft-tissue injuries. Professor
Engstrom further averred that KNR attorneys do not maintain meaningful attorney-client
interactions and exhibit a strong preference for settling cases in a systematic, expedited manner as
opposed to filing lawsuits.
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{¶14} In the sixth amended complaint, the plaintiffs alleged that KNR’s settlement mill
business model served as the fulcrum for three fraudulent schemes perpetrated by the firm and its
preferred healthcare providers. The basic tenets of the three alleged schemes alleged in the sixth
amended complaint are as follows.
{¶15} The alleged price-gouging scheme began with a quid pro quo referral network
involving KNR, chiropractors such as Dr. Floros, and Dr. Ghoubrial. Both KNR and its preferred
chiropractors pursued automobile accident victims with soft-tissue injuries through advertising
campaigns and an array of investigative tactics. Upon identifying and securing clients, KNR and
the chiropractors traded a high volume of referrals. The clients entered in a contingency fee
arrangement with KNR where the firm would receive a percentage of the legal settlement as its
fee for legal services. The agreement further authorized KNR to pay the costs of the client’s
medical treatment out of the gross settlement proceeds. Allegedly, with the aim of increasing the
value of each case, the clients were encouraged to seek ongoing chiropractic care and additional
medical treatment. Both KNR and the chiropractors strongly encouraged clients to seek additional
pain management treatment from Dr. Ghoubrial. Dr. Ghoubrial charged above-market rates for
trigger-point injections, TENS units, and back braces. Dr. Ghoubrial’s personal injury clinic does
not accept health insurance and clients are often not informed of the cost of the medical care. Dr.
Ghoubrial required his patients to sign a form allowing for collection of his bills out of the legal
settlements secured by KNR. The plaintiffs alleged that KNR prepared this form. The lack of
involvement of insurance companies removes a control on what can be charged for medical care.
KNR paid its preferred health care providers a disproportionately high sum of money to satisfy the
medical bills out of its clients’ settlements. The plaintiffs alleged that KNR profited from the
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scheme by cycling a large number of clients through the system and settling cases with a high rate
of efficiency prior to taking them to trial.
{¶16} The second alleged scheme centered on a “narrative fee” that served as a kickback
to chiropractors who directed a large number of clients to KNR. When done properly, medical
narrative reports are created by obtaining information from a patient about their case that might
not appear in standard medical records. Whether a narrative report is necessary is a determination
that is typically made on a case-by-case basis by the attorney representing the patient. The
plaintiffs alleged that regardless of the circumstances of each client’s case, KNR management
insisted on the creation of narrative reports as standard practice on cases handled by chiropractors
who referred a high volume of cases to KNR, such as Dr. Floros. The chiropractors used template
forms to create reports that did not benefit the clients in any discernable way. The fee associated
with the creation of the narrative report served as a kickback to the chiropractors to reward them
for their referrals.
{¶17} The third alleged scheme involved an “investigation” fee charged to all KNR clients
who obtained settlements. The plaintiffs alleged that the $50 to $100 fee effectively constituted a
double charge for services that were already subsumed within the contingency fee agreement.
Although the fee purportedly constituted reimbursement to an investigative firm that worked on
each case, the plaintiffs alleged that it actually represented the cost of basic marketing and the
performance of administrative tasks that are standard to any law practice. The plaintiffs alleged
that the fee could more accurately be described as a “sign-up” fee that covered expenses related to
obtaining standard information from new clients and getting them to sign an engagement letter
with KNR. The fee was allegedly charged on all cases, even when the investigators did not work
on the case.
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{¶18} The trial court ultimately issued a journal entry granting the motion to certify in
part and denying it in part.
{¶19} In granting the motion to certify, in part, with respect to Class A, the trial court
determined that certain aspects of the alleged price-gouging scheme involved common questions
that could be resolved by common evidence in a single adjudication. The trial court rejected that
portion of the alleged scheme pertaining to the solicitation and referral of clients, stressing that the
evidence showed that KNR and its preferred chiropractors obtained clients in a number of ways
that fell outside the parameters of the alleged conspiracy and, further, that Dr. Floros had no
involvement whatsoever with many of the class members. In regard to the portion of the scheme
that alleged a price-gouging arrangement between KNR and Dr. Ghoubrial, the trial court stated
as follows:
Evidence was presented that many of Dr. Ghoubrial’s patients were administered
trigger point injections and sold TENS units and back braces. Evidence was
presented that Dr. Ghoubrial substantially overcharged his patients for these items.
There was evidence that only Nestico was authorized to reduce Dr. Ghoubrial’s
bills and the reductions when they were made [were] only a twenty percent
reduction. * * * There was evidence presented that although more than 50% of Dr.
Ghoubrial’s personal injury patients were covered by some form of health
insurance, he required the patients to make payments out of the settlement proceeds.
It is also undisputed that KNR prepared the letter o[f] protection on Ghoubrial’s
stationary to insure the payment was made. It is clear that payments made to Dr.
Ghoubrial in this manner insured the charges he made would escape scrutiny by the
insurance carriers and other government agencies. * * * The argument by Dr.
Ghoubrial and KNR that there are no common questions which predominate
because some of Dr. Ghoubrial’s patients received a reduction in their charges for
these items is not persuasive.
{¶20} The trial court further found that a class action was the superior method for
litigating the claims for Class A as eligible class members would realize no benefit by filing their
own separate lawsuits and the cost of such litigation would otherwise be prohibitive. While the
trial court acknowledged that there might be some difficulties in the management of the class
9
action, those difficulties were not so burdensome as to deny class certification. The trial court
observed that Dr. Ghoubrial’s patients who did not receive reductions could form a class and those
who did could be placed in a sub-class in accord with the percentage of the reduction.
{¶21} The trial court denied the motion to certify as to Class B, the narrative fee class,
concluding that the evidence showed that whether an individual class member’s narrative report
was of value depended upon the circumstances of each case and would require independent
scrutiny of statements provided by each client, as well as the attorneys and claims examiners who
handled those cases. The evidence showed that many of the narrative reports did have value
because they contained information that that was not available in medical records. Accordingly,
the trial court concluded that the plaintiffs failed to demonstrate that questions of fact common to
Class B predominated over questions impacting individual class members.
{¶22} In granting the motion to certify as to Class C, the trial court found that all plaintiffs
were subject to the same alleged conduct, namely a standardized fee deducted from each settlement
where no investigation was provided and KNR could not provide an accounting for the alleged
investigatory services. The trial court granted the motion to certify on the basis that the plaintiffs’
claims pertaining to the alleged bogus investigative fee could be determined by common evidence
and that a class action was a superior method for litigating the claims given that the cost of
litigation would otherwise be prohibitive and class members would receive no benefit by trying
their cases individually. The trial court further found that if the plaintiffs demonstrated at trial that
the fee was illegitimate, disgorgement of the fee was an appropriate remedy.
KNR’S FIRST ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED IN CERTIFYING CLASS A – THE “PRICE-
GOUGING” CLASS ON CLAIMS ONE (FRAUD), TWO (BREACH OF
FIDUCIARY DUTY), THREE (UNJUST ENRICHMENT), AND FOUR
10
(UNCONSCIONABLE CONTRACT) OF THE SIXTH AMENDED
COMPLAINT.
DR. GHOUBRIAL’S ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED IN CERTIFYING CLASS A, THE “PRICE
GOUGING-CLASS” ON CLAIMS ONE FOR FRAUD, THREE FOR UNJUST
ENRICHMENT, AND FOUR FOR UNCONSCIONABLE CONTRACT FROM
THE SIXTH AMENDED COMPLAINT.
{¶23} KNR and Dr. Ghoubrial have raised assignments of error arguing that the trial court
abused its discretion in certifying Class A, the price-gouging class, because it failed to conduct a
rigorous analysis as required by Civ.R. 23. KNR and Dr. Ghoubrial maintain that it is not possible
for the plaintiffs to establish liability or damages in regard to Class A in a single adjudication with
evidence common to all class members.
{¶24} An appellate court reviews a trial court’s order certifying a class pursuant to Civ.R.
23 for an abuse of discretion. Setliff v. Morris Pontiac, Inc., 9th Dist. Lorain No. 08CA009364,
2009-Ohio-400, ¶ 5. An abuse of discretion implies that the trial court’s attitude was unreasonable,
arbitrary, or unconscionable. Blakemore v. Blakemore, 5 Ohio St.3d 217, 219 (1983).
{¶25} “The following seven requirements must be satisfied before an action may be
maintained as a class action 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 v. Ohio Savs. Bank, 82 Ohio St.3d 67, 71 (1998), citing Civ.R. 23(A),
(B).
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{¶26} Civ.R. 23(B)(3) provides as follows:
A class action may be maintained if Civ.R. 23(A) is satisfied, and * * * the court
finds that the questions of law or fact common to class members predominate over
any questions affecting only individual members, and that a class action is superior
to other available methods for fairly and efficiently adjudicating the controversy.
The matters pertinent to these findings include:
(a) the class members’ interests in individually controlling the prosecution or
defense of separate actions;
(b) the extent and nature of any litigation concerning the controversy already begun
by or against class members;
(c) the desirability or undesirability of concentrating the litigation of the claims in
the particular forum, and
(d) the likely difficulties in managing a class action.
{¶27} “When determining whether to certify a class, a trial court must conduct a rigorous
analysis, and it may grant certification only after resolving all relevant factual disputes and finding
that sufficient evidence proves that all requirements of Civ.R. 23 have been satisfied.” Cullen v.
State Farm Mut. Auto. Ins. Co., 137 Ohio St.3d 373, 2013-Ohio-4733, ¶ 2. “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 at
paragraph three of the syllabus.
{¶28} “Certification pursuant to Civ.R. 23(B)(3) requires the trial court to make two
findings: first, that the questions of law or fact common to the members of the class predominate
over any questions affecting only individual members and, second, that a class action is superior
to other available methods for the fair and efficient adjudication of the controversy.” (Internal
quotations omitted). Cullen at ¶ 29. “For common questions of law or fact to predominate, it is
not sufficient that such questions merely exist; rather, they must present a significant aspect of the
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case. Furthermore, they must be capable of resolution for all members in a single adjudication.”
Id. at ¶ 30, quoting Marks v. C.P. Chem. Co., Inc., 31 Ohio St.3d 200, 204 (1987).
{¶29} In support of its position that the trial court failed to adequately analyze the
predominance requirement set forth in Civ.R. 23(B), KNR argues that the trial court failed to
address how it would be possible to determine KNR’s responsibility for the charges that Dr.
Ghoubrial imposed on his patients by evidence common to all class members in a single
adjudication. KNR makes a similar argument in regard to the trial court’s finding that
disgorgement would be an appropriate remedy, contending that independent scrutiny of each class
member’s case would be required in order to determine how the inflated charges for medical care
ultimately impacted the settlement amount in each client’s case.
{¶30} Dr. Ghoubrial similarly argues that thousands of mini trials would be required in
order to resolve the liability issues involved with alleged price-gouging scheme, given that the
evidence showed that the course of medical treatment varied from patient to patient and his
standard rates evolved over the course of time. Dr. Ghoubrial maintains that the trial court failed
to conduct a rigorous analysis regarding whether it would be possible for the plaintiffs to
demonstrate that they were in fact injured in a class action setting, given that almost all class
members received a reduction in their medical bills. Stressing that the amount of the reductions
varied significantly depending on the circumstances of each case, Dr. Ghoubrial argues that the
proposed remedy of disgorgement would be untenable in a class action.
{¶31} A trial court abuses its discretion when it certifies a class action prior to conducting
a rigorous analysis of all the requirements set forth in Civ.R. 23. Mozingo v. 2007 Gaslight Ohio,
LLC., 9th Dist. Summit Nos. 26164, 26172, 2012-Ohio-5157, ¶ 8, 17. Civ.R. 23(B)(3) specifically
requires a trial court to make findings with respect to predominance and superiority prior to
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certifying a class action. Cullen, 137 Ohio St.3d 373, 2013-Ohio-4733, at ¶ 29. “This inquiry
requires a court to balance questions common among class members with any dissimilarities
between them, and if the court is satisfied that common questions predominate, it then should
‘consider whether any alternative methods exist for resolving the controversy and whether the
class action method is in fact superior.” Id., quoting Ealy v. Pinkerton Govt. Servs. Inc., 4th Cir.
No. 12-1252, 2013 WL 980035, *7 (Mar. 14, 2013).
{¶32} The alleged price-gouging scheme pertinent to Class A was the most elaborate of
the three fraudulent schemes set forth in the sixth amended complaint. Although the trial court
found that there was no basis to certify the class in regard to the alleged unlawful referral network,
it certified Class A with respect to a number of claims pertaining to the portion of the scheme
whereby KNR conspired with Dr. Ghoubrial to overcharge clients for medical care with the aim
of increasing the value of each client’s legal settlement. A careful review of the trial court’s journal
entry in this matter reveals that it failed to conduct a rigorous analysis with respect to the
predominance and superiority requirements as to Class A. Accordingly, this matter must be
remanded for the trial court to conduct that analysis in the first instance.
{¶33} While the trial court carefully identified many of the arguments advanced by the
parties with respect to the certification of Class A, it failed to ultimately resolve some of the
foremost evidentiary conflicts regarding whether the plaintiffs’ claims could be resolved by
evidence common to all parties in a single adjudication. See Cullen at ¶ 16 (concluding that the
rigorous analysis required under Civ.R. 23 “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”).
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{¶34} Perhaps most notably, the trial court failed to undertake a rigorous analysis of how
the plaintiffs could prove liability with common evidence when the evidence showed that the
individual class members were not similarly situated with respect to health insurance coverage.
One of the core allegations of the price-gouging scheme was that class members were overcharged
for medical care compared to what would have been charged had they been able to use health
insurance. Many class members who sought treatment from Dr. Ghoubrial did not have health
insurance at all. Some members, such as class representative Richard Harbour, maintained health
insurance coverage but expressed a preference not to use it for the purposes of pain management
treatment. Still other class members were willing to use either Medicare or their private health
insurance but were forced not to do so in order to obtain treatment from Dr. Ghoubrial. The trial
court made a general finding that KNR and Dr. Ghoubrial conspired to remove insurance
companies from the equation so that Dr. Ghoubrial’s charges “would escape scrutiny by the
insurance carriers and other government agencies.” Notably, however, the trial court declined to
analyze how the plaintiffs could prove their claims by common evidence under circumstances
where the insurance situations of the individual class members varied.
{¶35} Furthermore, in addressing the contention by KNR and Dr. Ghoubrial that the
plaintiffs could not satisfy the predominance requirement regarding the payment plan because
some patients received significant reductions in their charges for medical care, the trial court
simply found that this argument was “not persuasive” and cited a number of cases in support of
the proposition that individual differences among class members with respect to damages will not
defeat class certification.2 The trial court also suggested that “[Dr. Ghoubrial[’s] patients who did
2
The trial court cited and discussed Vinci v. Am. Can Co., 9 Ohio St.3d 98 (1984), as well
as this Court’s decision in Mozingo v. Gaslight Ohio, LLC, 9th Dist. Summit No. 27759, 2016-
Ohio-4828.
15
not receive reductions could form a class and those who did could be placed in a sub-class of the
price-gouging class representing the percentage of reduction.” The Supreme Court has held that
“[p]laintiffs 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.” Felix v. Ganley Chevrolet,
Inc., 145 Ohio St.3d. 329, 2015-Ohio-3430, ¶ 33. Here, resolution of the plaintiffs’ claims with
respect to the price-gouging scheme will at a minimum require determinations with respect to
whether Dr. Ghoubrial’s standardized rates constituted an overcharge for medical care and
equipment, the extent to which Dr. Ghoubrial’s clinic ultimately accepted reduced payments as
satisfaction for each patient’s bill, as well as the manner in which KNR attorneys played an active
role in facilitating those reductions based on the settlement value of each case in order to perpetuate
the scheme. The trial court failed to undertake a rigorous analysis as to whether these issues could
be resolved by common evidence in a single adjudication. See Cullen at ¶ 30.
{¶36} Finally, the trial court did not conduct a rigorous analysis when it summarily
concluded that disgorgement was an appropriate remedy. In its judgment entry, the trial court
stated, “Dr. Ghoubrial would be required to disgorge to the class members the amount of the
overcharge. KNR would be required to disgorge the amount of the contingent fee attributable to
the overcharges made by Dr. Ghoubrial. For example, if the settlement amount was increased by
$4,000.00 in overcharge, and KNR’s contingent fee was one-fourth of the recovery, then KNR
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would have to disgorge $1,000.00 of the fee as to that class member.” The trial court’s damages
formula involves identifying the amount of the overcharge in each class member’s case. As
discussed above, the calculation of the overcharge would involve a number of considerations. In
addition to the fact that not all class members received the same course of treatment, the record
suggests that some of Dr. Ghoubrial’s patients received little to no reduction in their medical bills
while other patients received significant reductions. The trial court did not scrutinize whether the
calculation of the overcharge could be established by common evidence in a single adjudication.
{¶37} This Court functions as a court of review and we exceed the scope of our authority
when we analyze issues in the first instance that have not first been addressed by the trial court.
See generally Guappone v. Enviro-Cote, Inc., 9th Dist. Summit No. 24718, 2009-Ohio-5540, ¶ 13.
As the trial court here failed to undertake a rigorous analysis of the requirements of Civ.R. 23(B)
with respect to the price-gouging class, this matter must be remanded for the trial court to
undertake that analysis in the first instance. See Midland Funding LLC v. Colvin, 3d Dist. Hancock
No. 5-18-15, 2019-Ohio-5382, ¶ 53. This Court takes no position as to whether the trial court
should ultimately certify the proposed class.
{¶38} It follows that KNR’s first assignment of error and Dr. Ghoubrial’s assignment of
error are sustained to the extent discussed above.
KNR’S SECOND ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED IN CERTIFYING CLASS C (THE
“INVESTIGATIVE FEE” CLASS) ON CLAIMS NINE (FRAUD), TEN
(BREACH OF CONTRACT), ELEVEN (BREACH OF FIDUCIARY DUTY),
AND TWELVE (UNJUST ENRICHMENT) OF THE SIXTH AMENDED
COMPLAINT.
{¶39} KNR raises a second assignment of error wherein it challenges the trial court’s
certification of Class C, the investigative fee class. KNR maintains that the trial court ignored the
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fact that KNR’s standard attorney-client contract contained a provision that allowed the firm to
seek reimbursement for reasonable expenses. KNR further argues that resolving the controversy
in a single adjudication with common evidence would be highly difficult given that the extent of
investigative services performed varied from case to case, meaning that an individual analysis of
each case would be required in order to determine whether the investigative fee charge was
reasonable.
{¶40} This Court remains mindful that we review the trial court’s order certifying a class
pursuant to Civ.R. 23 for an abuse of discretion. Setliff, 2009-Ohio-400, ¶ 5.
{¶41} In certifying Class C, the trial court found that all of the plaintiffs were exposed to
the same allegedly fraudulent conduct, namely a standardized fee that was deducted from their
settlements. While the charge was purportedly for investigative services, the plaintiffs claimed
that no investigative services were provided and that the fee was actually a sham sign-up fee. The
trial court found that generalized proof could show that KNR lacked any sort of accounting for the
investigative services provided. The trial court stressed that the core allegation was that the fee
was “an across the board sham, a subterfuge through which KNR extracts payment from their
clients for the ordinary overhead cost of performing a ‘sign up.’” Because the alleged fraud
involved “a single underlying scheme [with] common misrepresentations” that could be subject to
common proof, the trial court concluded that common questions among class members
predominated. Significantly, the trial court observed that “it does not matter whether differences
exist between the nature and value of the ‘investigatory’ services provided to the individual class
members [because] these services had nothing to do with the true rationale for charging the
investigation fee.”
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{¶42} KNR’s argument that the trial court abused its discretion by disregarding the terms
of the contractual relationship between the parties is without merit. There is no dispute that the
class members entered into an agreement with KNR for legal services and agreed to have certain
expenses deducted from their settlements. While KNR emphasizes that all of its clients agreed to
be responsible for reimbursement of “reasonable expenses[,]” the gravamen of the alleged fraud is
that the investigative fee charge was a sham and bore no rational relationship to any investigative
services provided, meaning the clients could not have agreed to the charge. The claims with
respect to the investigative fee class are based upon a standardized charge that applied to all class
members as well as an alleged common misrepresentation as to the basis for that charge. “At the
certification stage in a class-action lawsuit, a trial court must undertake a rigorous analysis, which
may include probing the underlying merits of the plaintiff’s claim, but only for the purpose of
determining whether the plaintiff has satisfied the prerequisites of Civ.R. 23.” Stammco L.L.C. v.
United Telephone Co. of Ohio, 136 Ohio St.3d 231, 2013-Ohio-3019, at syllabus. To the extent
that KNR would seek to defend against those claims by demonstrating that the charge was duly
incorporated into its standard attorney-client agreement, it has failed to demonstrate on appeal that
the trial court abused its discretion in concluding that the issue could be resolved with evidence
common to all class members in a single adjudication.
{¶43} KNR also argues that the trial court abused its discretion in certifying Class C
because an individual analysis of nearly 40,000 cases would be required in order to determine
whether investigative services were performed. In certifying the class, the trial court found that
there was “no evidence that KNR kept track of the specific ‘investigatory’ tasks ‘investigators’
performed on a case-by-case basis so the Defendants’ claim of actual services performed, or
individual inquiries required, is pure speculation as KNR saw no purpose in maintaining the data.”
19
As noted above, the nature of the alleged fraud is critical. The investigative fee scheme hinged on
the allegation that the charge was not connected to investigative services. The trial court concluded
that the predominance requirement was satisfied because common evidence could either prove or
disprove the plaintiffs’ claim that KNR charged an across-the-board investigative fee that had
nothing to do with investigatory services and was actually a sign-up fee that covered the cost of
securing clients. It is well settled that “[i]f a fraud was accomplished on a common basis, there is
no valid reason why those affected should be foreclosed from proving it on that basis. * * * Courts
also generally find that a wide variety of claims may be established by common proof in cases
involving similar form documents or the use of standardized procedures and practices.”
Baughman v. State Farm Mut. Auto. Ins. Co., 88 Ohio St.3d 480, 490 (2000), quoting Cope v.
Metro Life Ins. Co., 82 Ohio St.3d 426, 430 (1998). Under these circumstances, where the alleged
fraud involved standardized charges and misrepresentations common to all class members, we
cannot say that the trial court’s decision to certify the investigate fee class was unreasonable,
arbitrary, or unconscionable.
{¶44} KNR’S second assignment of error is overruled.
III.
{¶45} KNR’s first assignment of error is sustained. Dr. Ghoubrial’s sole assignment of
error is also sustained. KNR’s second assignment of error is overruled. The judgment of the
Summit County Court of Common Pleas is affirmed in part and reversed in part and remanded for
further proceedings consistent with this decision.
20
Judgment affirmed in part,
reversed in part,
and the cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the period
for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is instructed to
mail a notice of entry of this judgment to the parties and to make a notation of the mailing in the
docket, pursuant to App.R. 30.
Costs taxed equally to both parties.
DONNA J. CARR
FOR THE COURT
HENSAL, P. J.
SUTTON, J.
CONCUR.
21
APPEARANCES:
BRADLEY J. BARMEN, Attorney at Law, for Appellant.
JAMES M. POPSON, Attorney at Law, for Appellants.
THOMAS P. MANNION, Attorney at Law, for Appellants.
R. ERIC KENNEDY and DANIEL P. GOETZ, Attorneys at Law, for Appellants.
PETER PATTAKOS and RACHEL HAZELET, Attorneys at Law, for Appellees.