139 Wash. App. 280 | Wash. Ct. App. | 2007
¶1 — Appellants brought a class action lawsuit on behalf of all AT&T Wireless Services customers who were charged a “universal connectivity charge” (UCC) from 1998 through 2003. They allege that AT&T violated Washington’s Consumer Protection Act (CPA)
¶2 The trial court correctly ruled that the CPA applies to the appellants’ nationwide claims. AT&T’s most significant contacts were within the state, Washington has an impor
FACTS
¶3 AT&T sells its wireless service on monthly plans, and subscribers pay monthly fees for the service. AT&T advertises its monthly rates in the media and other marketing materials and provides a preprinted standard form contract to each new customer explaining the terms and conditions of service. Customer contracts include a choice of law clause.
¶4 In addition to its monthly fees and mandatory government taxes and fees, AT&T began charging new subscribers a universal connectivity charge in 1998. In January and February 1998, AT&T sent its existing customers a notice with their bill that described the UCC and what it would cost. From 1998 through 2003, AT&T billed its customers for the UCC under the “Taxes, Surcharges, and Regulatory Fees” category. The appellants allege that the
¶5 The appellants filed a motion to certify a class of AT&T customer plaintiffs who, like themselves, signed up for service between March 1998 and February 2003 and were charged and paid the UCC even though it was not in their service contract and was misrepresented as a government fee or tax. The trial court found that the CPA applied to all nationwide members of the class because CPA claims arise from statute rather than the contract, and the factual basis for the claims occurred before the parties entered into their respective contracts. But it denied class certification on both the CPA and contract claims because the appellants did not satisfy the commonality and typicality tests set forth in CR 23(a) and CR 23(b)(3). In its memorandum opinion, the trial court explained that it denied certification on the CPA claim because each class member was required to establish causation by proving individual reliance. It denied certification on the contract claims because the choice of law provision in each consumer’s contract created individualized issues of liability and provided affirmative defenses that made a class action unmanageable.
¶6 We granted discretionary review of the class certification issue. On January 24, 2006, the trial court entered final judgment and this appeal was converted into an appeal of right under RAP 2.2(a)(1). The appellants appeal the trial court’s denial of their motion for class certification. AT&T cross-appeals the trial court’s decision that the CPA applies to non-Washington plaintiffs.
¶7 A trial court’s class certification decision is discretionary and will not be overturned absent an abuse of that discretion.
¶8 When the trial court heard the certification motion, the complaint alleged breach of contract and violations of the CPA. The appellants argue that their claims meet all of the threshold requirements of CR 23(a) and CR 23(b)(3), common issues predominate over individual ones, and a class action is superior to individual claims because the monetary losses are small. The appellants assert that the trial court’s decision was an abuse of discretion and based on an erroneous view of the law because it ignored the legislature’s mandate to apply CR 23 liberally in favor of granting class certification.
Consumer Protection Act
¶9 The appellants allege a violation under the CPA on the ground that AT&T sold its service at an advertised price
¶10 AT&T asserts that RCW 19.86.090 requires a causal link between the allegedly unfair or deceptive acts and the injury suffered by the appellant under the holding in Hangman Ridge Training Stables, Inc. v. Safeco Title Insurance Co.
¶11 RCW 19.86.090 provides a private right of action to allow private individual citizens to bring suit to enforce the CPA. In Hangman Ridge, the Washington Supreme Court identified five elements that plaintiffs in private CPA claims must show to prevail: (1) an unfair or deceptive act or practice (2) in trade or commerce, (3) which affects the public interest, (4) injury to the plaintiff’s business or property, and (5) a causal link between the
¶12 In Nuttall v. Dowell, a pre-Hangman Ridge case relied on by the trial court and AT&T, we affirmed denial of class certification in a case involving a dispute between an individual and a real estate broker.*
¶13 After Hangman Ridge, we held in Pickett v. Holland America Line-Westours, Inc. (Pickett I) that injury and causation in CPA claims could be satisfied by means other than reliance.
¶14 Both parties agree that causation is required under RCW 19.86.090 and the holding in Hangman Ridge. Here the trial court relied on Nuttall to deny the plaintiff’s CPA claims. But contrary to AT&T’s assertion, Nuttall is not the only Washington authority on point. While Nuttall has never been expressly overruled, given the many differences between Nuttall and this case, it is easily distinguished. First, Nuttall did not involve a class certification motion and its attendant liberal construction rules. Second, the facts in Nuttall would not have satisfied the public interest element of a CPA claim because it involved a single transaction and the misrepresentation was not one that was likely to injure other consumers. Unlike the appellants in this case who were forced to rely solely on the defendant’s representations about the UCC, the plaintiff in Nuttall was able to investigate the property boundary on his own and evaluate the realtor’s representations. These facts made reliance a critical component of causation in Nuttall.
We need not engage in an inquiry whether each plaintiff would have purchased a cruise ticket had they known about the port charges and taxes. We simply hold that Holland America cannot impose on passengers fees, which are not port charges and taxes, and yet call them government charges, taxes, and fees — pass-through charges — when they are not. . . .[19]
¶16 In its amicus brief, the attorney general emphasizes the importance of CPA actions brought by “private attorneys general” which supplement the efforts of his office. If individual reliance were the exclusive means of proving causation in class action CPA claims, particularly those concerning misrepresentations or nondisclosure of material facts, many meritorious private CPA claims could not be brought. Such a rule would place class plaintiffs in the impossible position of proving a negative; that is, that they believed the opposite of the omitted fact when they made their purchase. The attorney general directs our attention to Morris v. International Yogurt Co., in which the court stated:
it is virtually impossible to prove reliance in cases alleging nondisclosure of material facts. The inquiry that would normally be made in a case of affirmative misrepresentation — did the plaintiff believe the defendant’s representation, and did that belief cause the plaintiff to act — does not apply in a case of nondisclosure.[20]
¶17 Trial courts must take the appellants’ substantive allegations as true when ruling on a motion for class certification.
Impact of Choice of Law Clause on CPA Claims
¶18 The trial court held that the choice of law provisions in the contracts did not apply to the CPA claims because those claims were based on the statute rather than contract and arose before the class members entered into their contracts with AT&T. The trial court also ruled that the legislature intended that the CPA regulate Washington businesses whether their conduct affects Washington or non-Washington consumers. In so doing, the trial court
(1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6.
(2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury occurred,
(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the parties is centered.
These contacts are to be evaluated according to their relative importance with respect to the particular issue.
¶19 AT&T argues the trial court erred by considering its headquarters location rather than the forum in which each consumer purchased wireless service. AT&T contends the court should have relied on Restatement (Second) of Conflict of Laws section 145 (1971), which focuses on the plaintiff’s substantial contacts and the forum where the plaintiff was allegedly deceived and purchased service.
¶20 Where reliance upon false or fraudulent representations or advertising is a substantial factor in inducing a plaintiff and proposed class members to purchase a defendant’s goods or services, Restatement (Second) of Conflict of Laws section 148(2) (1971) identifies the following factors to determine the forum state based on a determination of which state has the most significant relationship to the occurrence and parties:
(a) the place, or places, where the plaintiff acted in reliance upon the defendant’s representations,
(b) the place where the plaintiff received the representations,
*294 (c) the place where the defendant made the representations,
(d) the domicil, residence, nationality, place of incorporation and place of business of the parties,
(e) the place where a tangible thing which is the subject of the transaction between the parties was situated at the time, and
(f) the place where the plaintiff is to render performance under a contract which he has been induced to enter by the false representations of the defendant.
Although contractual choice of law provisions may be considered, they do not dictate the choice of law for tort claims.
¶21 Here, the trial court found that the most significant relationships were in Washington because all of the marketing materials and service agreements originated in Washington at the direction of Washington employees. All of the billing and disclosure decisions were made by AT&T employees in Washington. All relevant evidence and witnesses are in Washington. Washington has a strong interest in regulating the activities of Washington businesses. And most importantly, as a Washington business, AT&T is subject to Washington law. These are significant factors which the trial court correctly applied to conclude that the Washington CPA applies to all of the appellants’ CPA claims. Accordingly, we reject AT&T’s cross-appeal.
Contract Claims
¶22 As we noted earlier, when ruling on a motion for class certification, a court must take the substantive allegations of the complaint as true.
¶23 The test for commonality has a low threshold. It is qualitative rather than quantitative and is satisfied so long as class members have one issue in common.
¶24 In order to certify a class, the court must also find the plaintiffs have satisfied one of the requirements of CR 23(b).
¶25 Here, the trial court denied class certification on the appellants’ contract claims because the choice of law provisions in the subscriber agreements created a predominance of individual issues and made the class unmanageable. The language of the choice of law provisions in the appellants’ contracts varied.
¶26 In its memorandum opinion, the trial court made several findings about the individual issues the contract claim raised: (1) liability issues differ based on the materials consumers relied upon, whether those materials were a service contract or advertising or promotional material explicitly mentioning the UCC; (2) contract interpretation rules would differ among class members from different states in light of the choice of law provisions of each Subscriber Agreement; (3) the type of context evidence that could apply to contract interpretation under the varying state laws could vary based on the information a customer may have obtained from the AT&T web site about the UCC and evidence about contacts between customers and AT&T after a customer received his first billing; and (4) the types of affirmative defenses that might arise under the varying state laws, including voluntary payment and enforcement of an arbitration clause. Based on the number of potential individual issues, the trial court concluded that the commonality and typicality requirements of CR 23(b) and (c) were not satisfied and that individual issues predominated over common class issues.
¶27 To determine whether common issues predominate over individual ones, a trial court pragmatically examines whether there is a common nucleus of operative facts in
¶28 Contrary to AT&T’s argument, extrinsic evidence to determine the individual consumer’s intent at formation will not be necessary here because these consumers entered
¶29 We reverse and remand to the trial court for further proceedings.
Grosse and Dwyer, JJ., concur.
Review granted at 163 Wn.2d 1022 (2008).
Ch. 19.86 RCW.
Some of the choice of law clauses identified a specific state law but most identified the customer’s area code as the forum for the choice of law.
Lacey Nursing Ctr. v. Dep’t of Revenue, 128 Wn.2d 40, 47, 905 P.2d 338 (1995).
Smith v. Behr Process Corp., 113 Wn. App. 306, 318-19, 54 P.3d 665 (2002) (quoting Brown v. Brown, 6 Wn. App. 249, 253, 492 P.2d 581 (1971)).
Brown, 6 Wn. App. at 256-57.
Smith, 113 Wn. App. at 319 (citing Pickett v. Holland Am. Line-Westours, Inc., 145 Wn.2d 178, 188, 35 P.3d 351 (2001), cert. denied, 536 U.S. 941 (2002)).
105 Wn.2d 778, 719 P.2d 531 (1986).
31 Wn. App. 98, 639 P.2d 832, review denied, 97 Wn.2d 1015 (1982).
145 Wn.2d 178, 196, 35 P.3d 351 (2001), cert. denied, 536 U.S. 941 (2002).
31 Wn. App. at 99-103.
Id. at 103-04.
Id. at 104.
Id. at 111.
101 Wn. App. 901, 918, 6 P.3d 63 (2000) (citing Edmonds v. John L. Scott Real Estate, Inc., 87 Wn. App. 834, 847, 942 P.2d 1072 (1997), review denied, 134 Wn.2d 1027 (1998); Mason v. Mortgage Am., Inc., 114 Wn.2d 842, 854, 792 P.2d 142 (1990)), rev’d on other grounds, Pickett II, 145 Wn.2d 178.
87 Wn. App. 834, 847, 942 P.2d 1072 (1997); 114 Wn.2d 842, 854, 792 P.2d 142 (1990).
Pickett II, 145 Wn.2d at 201. The trial court in Pickett denied class certification on several bases. Pickett appealed the trial court’s class certification motion, but his interlocutory appeal was denied. A class was then certified for settlement purposes. The appeal concerned only the settlement amount, not the trial court’s initial class certification decision. Id. at 185-86.
Id. at 197.
19 Pickett I, 101 Wn. App. at 920.
20 107 Wn.2d 314, 328, 729 P.2d 33 (1986) (citing Wilson v. Comtech Telecomms. Corp., 648 F.2d 88, 92 n.6, 93 (2d Cir. 1981)).
The sheer number of negatives required to construct this sentence demonstrates the impossibility of the proof requirement AT&T seeks to impose on the appellants.
Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975), cert. denied, 429 U.S. 816 (1976).
See Pickett I, 101 Wn. App. at 920.
AT&T presents numerous arguments concerning the legitimacy of the UCC. None of this is relevant to the issue here because the trial court must take the substantive allegations of the complaint as true at the certification stage. Blackie, 524 F.2d at 901.
Haberman v. Wash. Pub. Power Supply Sys., 109 Wn.2d 107, 159, 744 P.2d 1032, 750 P.2d 254 (1987), appeal dismissed sub nom. Am. Express Travel Related Servs. Co. v. Wash. Pub. Power Supply Sys., 488 U.S. 805 (1988).
Blackie, 524 F.2d at 901.
CR 23(a) provides:
Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (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.
Numerosity and adequacy of representation are not at issue here.
Blackie, 524 F.2d at 1082.
Smith, 113 Wn. App. at 320 (citing Baby Neal v. Casey, 43 F.3d 48, 58 (3d Cir. 1994)).
In re Am. Med. Sys., Inc., 75 F.3d 1069, 1080 (6th Cir. 1996).
Id.
Miller v. Farmer Bros. Co., 115 Wn. App. 815, 824, 64 P.3d 49 (2003) (citing Brown, 6 Wn. App. at 255).
Miller v. Farmer Bros. Co., 115 Wn. App. 815, 824, 64 P.3d 49 (2003) (citing Brown, 6 Wn. App. at 255).
Id. (internal quotation marks omitted) (quoting Yslava v. Hughes Aircraft Co., 845 F. Supp. 705, 715, 715 (D. Ariz. 1993)).
CR 23(b) provides:
Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of section (a) are satisfied, and in addition:
(1) The prosecution of separate actions by or against individual members of the class would create a risk of
(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or
(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interest; or
(2) The party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or
(3) The court finds 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 matters 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 of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.
Miller, 115 Wn. App. at 825-26 (citing 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 4.25, at 4-85 (3d ed. 1992)).
Id. at 825 (alteration in original) (quoting 1 Newberg, supra, § 4.25, at 4-84).
Id. (citing 1 Newberg, supra, § 4.25, at 4-83).
For example, some contained a clause stating: “ ‘This Agreement is subject to applicable federal laws, federal or state tariffs, if any, and the laws of the state associated with the [consumer’s phone] number.’ ” Schnall’s subscriber agreement included the following language: “This agreement is subject to applicable federal and state laws, and tariffs, and the laws of the state associated with the Number, without regard to such state’s conflict of law rules.” According to AT&T, other contracts contained choice of law clauses naming specific states.
McGill v. Hill, 31 Wn. App. 542, 547, 644 P.2d 680 (1982).
Id. at 547-48; see also Restatement (Second) of Conflict of Laws § 187 (1971), which states:
§ 187 Law of the State Chosen by the Parties
(1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.
(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either
*298 (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties choice, or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
(3) In the absence of a contrary indication of intention, the reference is to the local law of the state of the chosen law.
Erwin v. Cotter Health Ctrs., Inc., 133 Wn. App. 143, 135 P.3d 547 (2006), review granted, 159 Wn.2d 1011 (2007).
Smith, 113 Wn. App. at 323 (citing Clark v. Bonded Adjustment Co., 204 F.R.D. 662, 666 (E.D. Wash. 2002)).
On appeal, AT&T raises numerous arguments concerning the propriety of categorizing the UCC as a government charge and the steps taken to inform its customers about the UCC. But these arguments go to the merits of the plaintiffs’ claim and are not relevant to a decision concerning class certification.