FELIX ET AL., APPELLEES, v. GANLEY CHEVROLET, INC., ET AL., APPELLANTS.
No. 2013-1746
Supreme Court of Ohio
September 24, 2014—Decided August 27, 2015
[Cite as Felix v. Ganley Chevrolet, Inc., 145 Ohio St.3d 329, 2015-Ohio-3430.]
O‘CONNOR, C.J.
{¶ 1} In this appeal, we address whether all members of a plaintiff class alleging violations of the Ohio Consumer Sales Practices Act (“OCSPA“),
RELEVANT BACKGROUND
{¶ 2} This appeal arises from two related class-action lawsuits that were first brought by appellees, Jeffrey and Stacy Felix, nearly 15 years ago. In each suit, the Felixes sought damages from appellants, Ganley Chevrolet, Inc., and Ganley Management Company (collectively, “Ganley“), as well as declaratory and injunctive relief. Although the issues before us are discrete legal ones, we summarize the history of the case for context.
The Transaction
{¶ 3} The Felixes contend that they went to Ganley in March 2001 to purchase a 2000 Chevy Blazer. They allege that Ganley used a zero-percent-interest financing offer to lure Jeffrey Felix to sign a contract to purchase the vehicle.
{¶ 4} The purchase contract provided that it was “not binding unless accepted by seller and credit is approved, if applicable, by financial institution.” The contract also contained an arbitration clause that required that “any dispute between you and dealer (seller) will be resolved by binding arbitration.”1
{¶ 6} More than a month later, Ganley informed the Felixes that they had not been approved for financing at the 1.9 percent interest rate. Ganley told the Felixes that they could obtain a 9 percent interest rate with Huntington Bank; the Felixes claim that Ganley contacted Huntington Bank without their permission. The Felixes refused. Soon thereafter, they brought the first of two suits against Ganley in the Cuyahoga County Common Pleas Court.
The Initial Lawsuit
{¶ 7} In their first action, which would become a class-action suit with the Felixes as representatives of the class, the Felixes sought damages under the OCSPA.2
{¶ 8} The first three counts of the complaint alleged the class-action claims that are at issue here. The first count asserted that the arbitration clause used by Ganley was unconscionable and that various practices of Ganley pertaining to the clause violated the OCSPA. Counts two and three alleged that Ganley had committed unfair and deceptive consumer sales practices against the class.
{¶ 9} In their prayer for relief for the class, the Felixes sought certification of their proposed classes of plaintiffs and defendants, an order declaring the arbitration clause unconscionable and void, injunctive relief, “monetary damages against Defendants, jointly and severally, where appropriate to each plaintiff,” and reasonable attorney fees and costs. The Felixes did not specifically request $200 in damages for each class member. Nor did they seek actual damages for each class member. They did, however, make those requests in their prayer for
B. OPTIONAL EQUIPMENT Arbitration—Any dispute between you and dealer (seller) will be resolved by binding arbitration. You give up your right to go to court to assert your rights in this sales transaction (except for any claim in small claims court). Your rights will be determined by a neutral arbitrator, not a judge or jury. You are entitled to a fair hearing, but arbitration procedures are simpler and more limited than rules applicable in court. Arbitrator decisions are as enforceable as any court order and are subject to a very limited review by a court. See general manager for information regarding arbitration process.
The Second Lawsuit
{¶ 10} The second lawsuit, brought several months after the first suit, is a declaratory-judgment action. The declaratory-judgment action also became a class-action suit.
{¶ 11} The first count of the declaratory-judgment complaint sought a declaration that the arbitration clause is unconscionable. The second, third, and fourth counts sought declarations that Ganley committed unfair and deceptive consumer sales practices with respect to the arbitration clause. And count five requested a declaration that Ganley made false statements, representations, and disclosures of fact and defrauded customers as to the arbitration clause.
{¶ 12} Ganley moved to stay the proceedings in both suits so that arbitration in accordance with the arbitration clause could proceed. The trial court held a consolidated hearing on the motions and denied them without opinion. Ganley appealed that order to the Eighth District Court of Appeals.3 Felix v. Ganley Chevrolet, Inc., 8th Dist. Cuyahoga Nos. 86990 and 86991, 2006-Ohio-4500, 2006 WL 2507469 (“Felix I“).
The Initial Appeal: Felix I
{¶ 13} In its appeal from the denial of the motion to stay, Ganley argued that the trial court erred by failing to stay the proceedings pending arbitration pursuant to
{¶ 14} In so doing, the appellate court recognized that
The Remand
{¶ 16} After remand, the parties litigated for another five years. Eventually, the trial court certified a class of plaintiffs pursuant to Civ.R. 23(B)(2) and (B)(3) and ruled that all class members could recover damages.
{¶ 17} The putative class includes the following:
All consumers of Vehicles from any of the 25 Ganley Companies (see Plaintiff‘s Chart, Exhibit A, filed August 18, 2003) within the two-year period preceding commencement through the present date (the Class Period), who signed a purchase agreement containing the arbitration clause at suit or one substantially similar thereto.
{¶ 18} The trial court held that Ganley‘s inclusion of the arbitration provision in its purchase agreements with consumers violated the OCSPA and established a basis for classwide relief under
{¶ 19} Ganley again appealed.
The Second Appeal: Felix II
{¶ 20} Before the Eighth District, Ganley argued that the trial court “erred as a matter of law and abused its discretion in certifying, for purposes of a claim under the [CSPA], a class of customers who signed purchase agreements that included an arbitration provision.” (Brackets sic.) A divided panel of the
{¶ 21} The appellate court rejected Ganley‘s claim that certifying an “all customers” class for the OCSPA violation was improper on the ground that the class contained individuals who had not sustained actual damages as a result of Ganley‘s inclusion of the arbitration provision in its sales agreements. But it did so without squarely addressing the crux of Ganley‘s claim, i.e., that there was no showing that all class members had suffered damages. Instead, the majority held that the propriety of the trial court‘s order on damages was outside the scope of the appellate court‘s scope of review because Ganley had assigned as error only the trial court‘s certification of the class. Id. at ¶ 44.
The Appeal Before Us
{¶ 22} Ganley sought this court‘s discretionary review. We agreed to address the following propositions of law:
A class action cannot be maintained on behalf of a putative class that includes individuals who did not sustain actual harm or damage as a result of the challenged conduct, which is a required part of the rigorous analysis under Ohio R. Civ. P. 23; [and]
In a class action brought under the Ohio Consumer Sales Practices Act,
R.C. 1345.09(B) requires the consumers to have sustained actual damages as a result of the challenged conduct.
See 138 Ohio St.3d 1413, 2014-Ohio-566, 3 N.E.3d 1215.
ANALYSIS
{¶ 23} This appeal arises at the intersection of class-action suits and the OCSPA.
{¶ 24} The procedural aspects of class-action litigation in Ohio are controlled by
{¶ 25} We are mindful that class-action suits are the exception to the usual rule that litigation is conducted by and on behalf of only the individually named parties. Comcast Corp. v. Behrend, 569 U.S. 27, 133 S.Ct. 1426, 1432, 185 L.Ed.2d 515 (2013), citing Califano v. Yamasaki, 442 U.S. 682, 700-701, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979). To fall within that exception, the party bringing the class action must affirmatively demonstrate compliance with the procedural rules governing class actions. Id., citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 131 S.Ct. 2541, 2551-2552, 180 L.Ed.2d 374 (2011).
{¶ 26} The United States Supreme Court has insisted that courts give careful consideration to the class-certification process, holding that
{¶ 27} Because the appeal before us involves the certification of a class for claims based on alleged violations of the OCSPA, it is necessary to set forth briefly the relevant provisions in that statutory scheme.
{¶ 28} During the period set forth in the class action, the OCSPA provided that a consumer was entitled to relief in an individual action by rescinding the transaction or recovering damages. Former
{¶ 29} Although the OCSPA authorized class actions, it limited the scope of damages that were available in them. Treble and statutory damages were not available in class-action claims brought under the OCSPA. Former
{¶ 30} This damage limitation is consistent with a policy determination that while treble or statutory damages, punitive damages, and attorney fees are available in actions under consumer-protection statutes to encourage consumers with smaller amounts of damages to bring their claims, Whitaker at ¶ 11, citing Parker v. I & F Insulation Co., Inc., 89 Ohio St.3d 261, 268, 730 N.E.2d 972 (2000); see also Sovern, Private Actions Under the Deceptive Trade Practices Acts: Reconsidering the FTC Act as Rule Model, 52 Ohio St.L.J. 437, 462 (1991), treble statutory damages are not awarded in class actions because class-action lawsuits deter violations of the law by permitting the aggregation of claims. In fact, some courts have suggested that the General Assembly limited damages for class-action suits under the OCSPA in order to protect defendants from being held liable for “huge damage awards.” See, e.g., Washington at ¶ 33.
{¶ 31} Plaintiffs bringing OCSPA class-action suits must allege and prove that actual damages were proximately caused by the defendant‘s conduct. Konarzewski v. Ganley, Inc., 8th Dist. Cuyahoga No. 92623, 2009-Ohio-5827, 2009 WL 3649787, ¶ 46 (“class action plaintiffs must prove actual damages under the CSPA“). Proof of actual damages is required before a court may properly certify a class action. Searles v. Germain Ford of Columbus, L.L.C., 10th Dist. Franklin No. 08AP-728, 2009-Ohio-1323, 2009 WL 756645, ¶ 22. See also Butler v. Sterling, Inc., 6th Cir. No. 98-3223, 2000 WL 353502, *4 (Mar. 31, 2000); Johnson v. Jos. A. Bank Clothiers, Inc., S.D.Ohio No. 2:13-cv-756, 2014 WL 4129576, *3-4 (Aug. 19, 2014).
{¶ 32} These requirements are consistent with the majority of decisions by other states’ appellate courts, which also hold that plaintiffs who bring private causes of action under their states’ consumer-protection statutes are required to plead and prove actual damages or injury.4 See, e.g., Meyer v. Sprint Spectrum
{¶ 33} Plaintiffs in class-action suits must demonstrate that they can prove, through common evidence, that all class members were in fact injured by the defendant‘s actions. In re Rail Freight Fuel Surcharge Antitrust Litigation—MDL No. 1869, 725 F.3d at 252. Although plaintiffs at the class-certification stage need not demonstrate through common evidence the precise amount of damages incurred by each class member, Behrend, 569 U.S. at —, 133 S.Ct. at 1433, citing Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563, 51 S.Ct. 248, 75 L.Ed. 544 (1931), they must adduce common evidence that shows all class members suffered some injury. In re Rail Freight Fuel Surcharge Antitrust Litigation at 252, citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623-624, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997), and Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 815-816 (7th Cir. 2012).
{¶ 34} The inquiry into whether there is damage-in-fact is distinct from the inquiry into actual damages: the “[f]act of damage pertains to the existence of
When evaluating damages in the predominance inquiry, “[t]he amount of damages is invariably an individual question and does not defeat class action treatment.” Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir.1975) (emphasis added); see also Negrete v. Allianz Life Ins. Co. of North America, 238 F.R.D. 482 (C.D.Cal. 2006). While determining the amount of damages does not defeat the predominance inquiry, a proposed class action requiring the court to determine individualized fact of damages does not meet the predominance standards of Rule 23(b)(3). See In re Live Antitrust Litigation, 247 F.R.D. 98 (C.D.Cal.2007) (recognizing the distinction between demonstrating the fact of damages and the amount of damages, and determining that while the latter does not preclude class certification, the former does.); Catlin v. Washington Energy Co., 791 F.2d 1343, 1350 (9th Cir.1986) (“[T]he requirement that plaintiff prove ‘both the fact of damage and the amount of damage * * * are two separate proofs’ “).
Gonzales v. Comcast Corp., E.D.Cal. No. 10-cv-01010-LJO-BAM, 2012 WL 10621, *18 (Jan. 3, 2012).
{¶ 35} 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 member), there is no showing of predominance under
{¶ 36} “Perhaps the most basic requirement to bringing a lawsuit is that the plaintiff suffer some injury. Apart from a showing of wrongful conduct and causation, proof of actual harm to the plaintiff has been an indispensable part of civil actions.” Schwartz & Silverman, Common Sense Construction of Consumer Protection Acts, 54 U.Kan.L.Rev. 1, 50 (2005). We agree, and we hold that all members of a class in class-action litigation alleging violations of the OCSPA must have suffered injury as a result of the conduct challenged in the suit.
{¶ 38} The trial court‘s holding that it could award $200 to each member of the class as a matter of the trial court‘s discretion is based on a fiction. There 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.
{¶ 39} To the extent that the Felixes contend that they and other class members are entitled to statutory damages as class members because
{¶ 40} Nor is our review of the question of class members’ damages, or lack thereof, foreclosed for want of a final, appealable order, as the Felixes contend. The certification of the putative class is before us, and as the dissenting judge in the court of appeals recognized, “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
{¶ 41} Because the class certified in this case includes plaintiffs whose damages are, at best, inchoate, the class as certified is inconsistent with former
CONCLUSION
{¶ 43} We reverse the judgment of the Eighth District Court of Appeals, and we remand the cause to the trial court for further proceedings consistent with our opinion.
Judgment reversed and cause remanded.
PFEIFER, O‘DONNELL, LANZINGER, KENNEDY, and FRENCH, JJ., concur.
O‘NEILL, J., dissents.
O‘NEILL, J., dissenting.
{¶ 44} Respectfully, I dissent.
{¶ 45} I believe that the majority blurs the line between maintaining a class action and meeting the burden of proof in a class action that alleges violations of the Ohio Consumer Sales Practices Act (“OCSPA“),
{¶ 46} The majority holds that certifying a class in this case requires showing actual damages, but it fails to state whether this is a requirement under the OCSPA that is independent of the requirements laid out in
{¶ 48} The predominance inquiry under
{¶ 49} I do not believe that the trial court abused its discretion in determining that appellees met their burden under
{¶ 50} In Dukes, the court had to wade into the merits in order to determine whether there was a common policy of discrimination used by all of the thousands of supervisors responsible for each of the 1.5 million putative-class members. Dukes, 564 U.S. 356-358, 131 S.Ct. at 2541, 180 L.Ed.2d 374. The court‘s limited inquiry into the merits clarified that factual questions about discriminatory personnel practices would differ at each Wal-Mart store, and thus it was proper not to certify a class. Id. at 352-359. That is the type of case that fails for an inadequate showing of predominance under
{¶ 51} Like the plaintiffs in Amgen, however, appellants, Ganley Chevrolet, Inc., and Ganley Management Company (collectively, “Ganley“), allegedly used unconscionable arbitration terms in contracts with the putative-class members. The legal issue—whether use of an unconscionable arbitration term is a violation of the OCSPA—is overwhelmingly and obviously common to the class members because every single class member‘s claim would be won or lost on the answer to that question. Appellees did not fail to show a class for whom common questions of law or fact predominate over any individual questions; every member of the class could lose on the question of damages at the same time. See Cope v. Metro. Life Ins. Co., 82 Ohio St.3d 426, 429-430, 696 N.E.2d 1001 (1998) (“It is now well established that ‘a claim will meet the predominance requirement when there exists generalized evidence which proves or disproves an element on a simultaneous, class-wide basis, since such proof obviates the need to examine each class member‘s individual position.’ Lockwood Motors, Inc. v. Gen. Motors Corp., 162 F.R.D. 569, 580 (D.Minn.1995)“).
{¶ 52} This court also granted jurisdiction over Ganley‘s second proposition of law: “In a class action brought under the Ohio Consumer Sales Practices Act,
{¶ 53} The last sentence of
{¶ 54} The majority points to less-than-helpful cases to support muddling the class-certification standard under
{¶ 55} It is possible that Ganley could have prevailed in this matter by filing a successful motion for dismissal under
{¶ 56} As a final matter, I do not believe that answering the propositions of law before us would have completely resolved this matter. That is to say, there may have been other good reasons for reversal. Although appellees properly proposed a class, it seems plainly erroneous that the trial court summarily handed out “discretionary damages” immediately upon certifying the class. Ganley asked this court to consider issues surrounding that mistake in its memorandum in support of jurisdiction. I believe that it was unwise to accept jurisdiction on the class-action issue without accepting jurisdiction over the entire matter. The majority, which clearly quarrels with an award of damages that should be irrelevant to the issue before the court, now does actual damage to
{¶ 57} Class certification is, and should remain, an issue distinct from the resolution of the merits. Therefore, I dissent.
Ulmer & Berne, L.L.P., Joseph A. Castrodale, and David D. Yeagley; and A. Steven Dever Co., L.P.A., and A. Steven Dever, for appellants.
Zipkin Whiting Co., L.P.A., and Lewis A. Zipkin; and Law Offices of Mark Schlachet and Mark Schlachet, for appellees.
Stockamp & Brown, L.L.C., David A. Brown, and Deanna L. Stockamp, urging reversal for amici curiae Greater Cleveland Automobile Dealers Association and Ohio Automobile Dealers Association.
Bricker & Eckler, L.L.P., Drew H. Campbell, Ali I. Haque, and Kara H. Herrnstein, urging reversal for amicus curiae Ohio Association of Civil Trial Attorneys.