International Business Machines Corporation (IBM) appeals from the trial court’s grant of Barbara J. Kemp, Maria G. Wilson and Roger Wilson’s (plaintiffs) motion for class certification. IBM contends that the trial court erred by: (1) holding that New York law governs the fraud claim of all potential class members; (2) holding that New York law governs the contract claim of all potential class members; (3) granting class certification where the claims lack commonality; and (4) granting class certification prior to determining whether plaintiffs’ claims were preempted by federal law. Because the trial court based its grant of class certification on erroneous determinations of the law governing potential class members’ claims, we reverse in part, vacate in part and remand the case.
THE FACTS
IBM is headquartered in New York and has offices and employees in all 50 states and the District of Columbia. Plaintiffs, two former employees of IBM and the spouse of a former employee
In December 1994, plaintiffs filed a complaint asserting causes of action for fraud and breach of contract. Plaintiffs allege that they were defrauded when IBM canceled REAP benefits after they took early leave or early retirement. Plaintiffs further allege that the REAP benefits were promised by
The issue before this court concerns plaintiffs’ motion for class certification. The proposed class would consist of those former IBM employees who participated in ITO-II and their spouses, who did not receive full REAP benefits due to its suspension. Proposed class members are residents of Alabama, California, Colorado, Florida, Georgia, Illinois, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington, Wisconsin and the District of Columbia.
The trial court granted class certification, finding that the requirements of the class action statute, OCGA § 9-11-23, were met. Specifically, the trial court determined that the number of potential class members satisfied the numerosity requirement; that plaintiffs were adequate representatives of the class; that the superiority requirement was satisfied and that, because New York law would uniformly apply to the claims of all potential class members, the commonality requirement was met.
1. On appeal, IBM contends the trial court erred by granting class certification because New York law does not uniformly apply to all potential plaintiffs’ claims and, as a result, the commonality requirement is not met. We will analyze the conflict of laws for the tort claim and the contract claim in turn.
CONFLICT OF LAWS ANALYSIS
(a) IBM contends that the trial court erred by determining that New York law applied to fraud claims of all potential class members. We agree. The trial court properly determined that, for tort claims generally, Georgia applies the choice of law doctrine lex loci delictis. The trial court misapplied the doctrine of lex loci delictis to this case which involves a transitory tort. It is undisputed that the alleged fraud is of a transitory nature.
Under the rule of lex loci delictis, tort cases are generally governed by the substantive law of the place where the tort or wrong occurred. In torts of a transitory nature, the place of the wrong is the place where the last event occurred necessary to make an actor liable for the alleged tort.
1
Wardell v. Richmond Screw Anchor Co.,
The trial court ruled that New York law applied based on its determination that the last event necessary to establish liability for fraud was the decision to suspend REAP benefits, which occurred in New York. The decision to suspend REAP benefits was not, however, the last act necessary to establish liability for fraud. The elements of fraud are: “a false representation by a defendant, scienter, intention to induce the plaintiff to act or refrain from acting, justifiable reliance by plaintiff, and damage to plaintiff.”
Crawford v. Williams,
258
Ga. 806 (
Potential class members here did not suffer injury at the moment IBM decided to suspend benefits, as plaintiffs urge. A former employee or spouse was not entitled to reimbursement under REAP until tuition had been paid. Thus, injury occurred only when a former employee or spouse felt the effect of IBM’s decision, that is when IBM failed to reimburse tuition to those who would have qualified for reimbursement. This economic damage occurred in the state of residence of each potential class member at the time of such failure. Since the potential class members reside in a variety of states, the trial court erred in determining that New York law applied to the fraud claim of all potential class members. We do not address the merits of the underlying fraud claims.
(b) IBM contends that the trial court erred by determining that New York law applied to the contract claim of all potential class members. We agree.
Georgia courts apply the traditional lex loci contractus in contract actions.
Under this approach, contracts are to be governed as to their nature, validity, and interpretation by the law of the place where they were made, except where it appears from the contract itself that it is to be performed in a State other than that in which it was made, in which case, the laws of that sister State will be applied. In order to determine where a contract was made, the court must determine where the last act essential to the completion of the contract was done.
(Citations and punctuation omitted.)
Gen. Tel. Co. &c. v. Trimm,
Because the trial court did not reach the necessary factual determinations (it erred in determining that New York law applied to the contract claim of all potential class members), we are therefore unable to reach the issue on the record before us.
(c) Absent an appropriate factual basis, the trial court erred by finding the commonality requirement of the class action statute has been satisfied. We remand this case to the trial court to (1) make the required factual findings and determine the law governing the breach of contract claim and (2) determine whether, after applying the appropriate choice of law, the commonality requirement of the class action statute is met and whether class certification as prayed is proper.
2. IBM has raised as a defense that plaintiffs’ claims are preempted because the state law claims relate to an Employee Retirement Income Security Act (ERISA) covered plan (parts of ITO-II). IBM contends that the trial court erred by granting class certification prior to determining whether plaintiffs’ claims were preempted by federal law. In
Kemp v. Intl. Business Machines Corp.,
This court has previously addressed the priority of issue resolution and held: “[I]n determining the propriety of a class action, the first issue to be resolved is not whether the plaintiffs have stated a cause of action or may ultimately prevail on the merits but whether the requirements of
Judgment reversed in part, vacated in part and remanded.
Notes
See Alexander
v.
Gen. Motors Corp.,