JOHNSON‘S SALES COMPANY, INC., Kent Johnson‘s Warehouse Showroom, Inc., Johnson‘s Warehouse Showroom, Inc., and Best Buy Home Furnishings, Inc. v. Wanda HARRIS, on Behalf of Herself and Those Similarly Situated, and Decorrien Flemming
06-1237
Supreme Court of Arkansas
June 28, 2007
260 S.W.3d 273
Allen Law Firm, by: H. William Allen and Christian Harris, for appellee Wanda Harris and those similarly situated.
DONALD L. CORBIN, Justice. Appellants Johnson‘s Sales Company, Inc., Kent Johnson‘s Warehouse Showroom, Inc., Johnson‘s Warehouse Showroom, Inc., and Best Buy Home Furnishings, Inc. (collectively “Johnson‘s“), appeal from the Hempstead County Circuit Court‘s order granting class certification under
Appellees Wanda Harris and Decorrien Flemming (collectively “Harris“), as individuals who entered into and held purchase agreements with Johnson‘s retail stores to purchase furniture through periodic payments, filed a class-action complaint against Johnson‘s.1 Specifically, Harris claimed that, under the purchase agreements, Johnson‘s charged an interest rate in excess of that allowed by
On May 21, 2004, and July 29, 2004, hearings were held on the issue of class certification. After full consideration of all the evidence, briefs, and arguments submitted in support of and in
All persons who entered into or held purchase agreements with eight (8) retail stores owned by Defendants to finance goods through periodic payments from July 24, 1997, to present and whose purchase agreements state on their face an “Annual Percentage Rate” in excess of the Discount Rate on 90-Day Commercial Paper as promulgated by the Federal Reserve Bank in St. Louis, Missouri, in effect on the date that their purchase agreements were signed.
On appeal, both parties and the circuit court have stipulated that the proposed class was intended to state:
All persons who entered into or held purchase agreements with eight (8) retail stores owned by Defendants to finance goods through periodic payments from July 24, 1997, to present and whose purchase agreements state on their face an “Annul Percentage Rate” in excess of five percent (5%) per annum above the Discount Rate on 90-Day Commercial Paper as promulgated by the Federal Reserve Bank in St. Louis, Missouri, in effect on the date that their purchase agreements were signed. [Emphasis supplied.]
On appeal, Johnson‘s argues that the circuit court erred in certifying the underlying case as a class action. Specifically, it asserts that the circuit court abused its discretion in finding that the Rule 23 requirements of (1) commonality, (2) predominance, and (3) superiority were met.
Circuit courts are given broad discretion in matters regarding class certification and we will not reverse a circuit court‘s decision to grant or deny class certification absent an abuse of discretion. Beverly Enters.-Ark., Inc. v. Thomas, 370 Ark. 310, 259 S.W.3d 445 (2007). When reviewing a circuit court‘s class-certification order, this court reviews the evidence contained in the record to determine whether it supports the circuit court‘s decision. Id. This court does not delve into the merits of the underlying claims at this stage, as the issue of whether to certify a
Rule 23 provides the requirements for class certification. Specifically, the following six requirements must be met before a lawsuit can be certified as a class action under Rule 23: (1) numerosity; (2) commonality; (3) typicality; (4) adequacy; (5) predominance; and (6) superiority. See Beverly, 370 Ark. 310, 259 S.W.3d 445. As stated above, Johnson‘s is only challenging the circuit court‘s ruling as to three of these criteria: commonality, predominance, and superiority.
Commonality
Here, the class is defined as all persons who entered into or held purchase agreements with Johnson‘s and whose purchase agreements state on their face an Annual Percentage Rate (APR) in excess of five percent per annum above the discount rate on 90-day commercial paper. Thus, there clearly is a common usury claim that runs amongst all class members. Consequently, the circuit court did not abuse its discretion in finding that the commonality element was satisfied.
Furthermore, Johnson‘s argument that the threshold question of whether or not a prospective class member actually paid interest in excess of the maximum lawful rate cannot be answered by the common questions of law or fact found by the circuit court is without merit. This argument fails for two reasons. First, Johnson‘s has not challenged the class definition and the class definition is very clear that class members are individuals who have entered into purchase agreements that, on their face, contain an
Predominance
[t]he predominance element can be satisfied if the preliminary, common issues may be resolved before any individual issues. In making this determination, we do not merely compare the number of individual versus common claims. Instead, we must decide if the issues common to all plaintiffs “predominate over” the individual issues, which can be resolved during the decertified stage of bifurcated proceedings.
In the present case, as stated above, a common wrong — the usury claim — is alleged against Johnson‘s. Johnson‘s claims that predominance cannot be met because the usury question for each prospective class member will require the court to examine the payment history of each customer to determine the actual interest rate at which he repaid his loan. This argument is flawed.
First, as this court has explained, if a case involves preliminary, common issues of liability and wrongdoing that affect all class members, the predominance requirement is satisfied even if the circuit court must subsequently determine individual damage issues in bifurcated proceedings. See id. Here, there is clearly an overlying common wrong alleged against Johnson‘s. Second, the fact that Johnson‘s may bring affirmative defenses and counterclaims against individual members of the class does not disqualify the case from certification. The predominance element can be satisfied if the preliminary, common issues may be resolved before individual issues, and the question is whether this is an overarching issue that can be addressed before resolving individual issues. Here, the usury claim is such an overarching issue. Lastly, Johnson‘s predominance argument, much like its commonality argument, would require this court to delve into the merits of the case, which we will not do. Consequently, the circuit court did not abuse its discretion in concluding that the need to resolve the usury question common to each class member outweighed the possibility of individual defenses, such that the predominance requirement was satisfied.
Superiority
Here, the circuit court found that the superiority requirement was satisfied because real efficiency will be achieved in this case if the common, predominating question of usury is decided first, with consideration of individual claims to be taken up later. Johnson‘s argument is primarily that the circuit court is unable to determine the amount of interest charged from the face of the purchase agreements and, consequently, each and every class member would have to come forth to prove the amount “charged.” This argument is without merit as members of the class are determined based upon what the APR is on the face of the purchase agreement. Johnson‘s has not challenged this class definition, thus there is no need for the circuit court to determine the actual amount of interest charged. Moreover, to examine the superiority issue as argued by Johnson‘s would again require this court to look into the merits of the case.
Additionally, in the spirit of class actions, real efficiency can be had if common, predominating questions of law or fact are first decided, with cases then splintering for the trial of individual claims. This is such a case. As the circuit court stated, because the individual claims amounts may be small, individual suits are inappropriate and a class action is a superior way to resolve the claims of the class members. This was not an abuse of discretion because a class action is the superior method to resolve the overarching usury claim common to all class members. Moreover, a class action is fair to both sides in this case, as it is a means for all class members to have their claims heard, and Johnson‘s will not have to defend against the same assertion of liability in a multitude of different lawsuits. As this court has explained, the class-action procedure is judicially efficient in resolving not only common
Based upon the foregoing reasons, we affirm the circuit court‘s order granting class certification.
Affirmed.
HANNAH, C.J., and GLAZE, J., dissent.
TOM GLAZE, Justice, dissenting. I disagree that this is a proper class under
The chancellor found the renewal note usurious because the terms of the loan agreement itself were usurious. Appellants rely on Dillon v. Resolution Trust Corp., 306 Ark. 173, 811 S.W.2d 765 (1991). In Dillon, we said the test of whether the note is usurious is judged as of the time the note was made. Appellants earnestly insist that language must govern in this case. But, as always, it must be read in context, and in Dillon it is clear that by both the terms of the note and the allocation of payments made pursuant to the note, a usurious rate of interest was being collected from the borrower. That did not occur in this case.
Id. (emphasis added). Stated simply, there is nothing in our case law or in
COUNSEL: Do you know of any difference between what the APR rate shown on the contract is, is there any difference between the percentage of APR and the percentage of interest that‘s charged interest rate that‘s charged on any contract?
Ms. MCMAHAN: Yes, that‘s what I was telling you before.
Previously, Ms. McMahan had attested that the APR rate provided on the face of the “installment contract with pre-computed interest” was merely an estimate of the amount to be charged at the time the contract was entered into, and not the actual amount “charged.” Tom Garrison, an employee of the Computer Services Company, corroborated Ms. McMahan‘s testimony that the “stated” interest on the contract was only an estimate of the amount to be charged at the time the contract was entered into, and the actual amount “charged” often varied. In other words, evidence before the circuit court reflected that the amount “charged” at the time of the contract could not be determined solely from the face of the purchase agreement, and that analysis is consistent with our case law.1 By the majority‘s holding, our judicial hands are forever tied to the contract terms, never being permitted to consider anything beyond the face of the agreement.
The superiority requirement contained in
Given this potential discrepancy between the actual interest stated and the interest ultimately charged, the circuit court would be required, with respect to every individual class member, to determine the difference between the “stated” interest rate and “charged” interest. Stated simply, the circuit court would have to perform a mathematical analysis on each and every purchase agreement in order to determine whether the interest charged was usurious. Thus, proceeding as a class action would not be an “efficient” method of handling this case. See Williamson v. Sanofi Winthrop Pharm., 347 Ark. 89, 101, 60 S.W.3d 428, 436 (2001) (because the trial court would have to hear each class member‘s testimony regarding his or her understanding about which paperwork applied, as well as consider all of the evidence from each plaintiff regarding whether he or she agreed to a contract, a class action could not be superior method of handling the case).
Despite the majority‘s contention otherwise, our analysis does not require delving into the merits; in other words, it does not require determining what the class members ultimately will pay or have paid in interest. Rather, what the majority fails to require, and what the law does require, is that the terms of the contract be examined to reveal whether the contract obligates the borrower to pay a rate in violation of the usury provision of the constitution. The question of what the borrower is obligated to pay is not answered by looking at the face of the contract as the majority concludes.
Because I would reverse on the superiority requirement, I respectfully dissent.
HANNAH, C.J., joins.