Yesterday the Third Circuit upheld a District of New Jersey decision denying class certification as to plaintiffs’ consumer fraud and unjust enrichment claims. Grandalski v. Quest Diagnostics Inc., 2014 U.S. App. LEXIS 17543 (3d. Cir. Sep. 11, 2014).
Plaintiffs alleged that Quest had overbilled them for testing services and their complaint proposed multiple nationwide litigation classes. Id. at *2-3. The court examined both causes of action and found neither met the standards or requirements for class certification.
First up was consumer fraud. In denying class certification, the district court conducted a choice of law analysis. On appeal, plaintiffs argued that such an analysis was premature and alternatively, that the choice of law ruling was incorrect. For their prematurity argument, plaintiffs relied on another Third Circuit decision that stated that it may be “inappropriate to decide choice of law issues incident to a motion for class certification.” Id. at *8 (citation omitted). But theGrandalski court quickly pointed out that that other case concerned settlement classes – not nationwide classes proposed for the purpose of trial. For putative litigation classes, “it was reasonable for the District Court to inquire at the certification stage as to whether the classes posed intractable management problems for trial.” Id. at *9. Such as – application of 50 different states’ consumer fraud statutes.
So, plaintiffs next took issue with the district court’s conclusion that the laws of the putative class members’ home states controlled their consumer fraud claims. It was undisputed that there was a conflict between New Jersey consumer fraud law and the consumer protection laws of other states. Id. at *10. Therefore, under New Jersey’s choice of law rules, it was up to the court to determine which state had the most “significant relationship” to the case. For this the court looked to §148(2) of the Restatement (Second) of Conflict of Laws. Section 148(2) addresses when alleged misrepresentations were made and received in different states and applies a 6 factor test: (a) the place where the plaintiff acted in reliance upon the defendant's representations; (b) the place where the plaintiff received the representations; (c) the place where the defendant made the representations; (d) the place of business of the parties; (e) the place where a tangible thing which is the subject of the transaction 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. Id. at *12.
The Third Circuit agreed with the district court that the totality of the factors weighed in favor of applying the law of plaintiffs’ home states – the place where plaintiffs received and paid the allegedly erroneous bills and where Quest performed and plaintiffs obtained the testing services. Finding that residency was a wash, the court held that the place where the representations were made – New Jersey – was not enough to overcome the remaining factors which all pointed to the plaintiffs’ home states. Id. at *13.
Plaintiffs advanced one more argument to try to save class certification of the consumer fraud claims – groupings. For purposes of trial, the court could group together plaintiffs whose state law prohibits “unfair or deceptive conduct” and those whose state law prohibits “false or misleading conduct.” Id. at *16-17. The Third Circuit acknowledged that while groupings may be a permissible approach – “plaintiffs face a significant burden to demonstrate that grouping is a workable solution.” Id. at *19. A burden that plaintiffs in Grandalski failed to carry: “Appellants must do more than provide their own ipse dixit, citation to a similar case, and a generic assessment of state consumer fraud statutes, to justify grouping.” Id. Without a viable trial grouping plan, the Third Circuit upheld the lower court’s decision that “class litigation involving dozens of state consumer fraud laws was not viable and that common facts and a common course of conduct did not predominate.” Id. at *20.
Moving on to unjust enrichment, plaintiffs failed to meet the predominance requirement. As framed by the court, the question is “whether essential elements of the class’s claims can be proven at trial with common, as opposed to individualized evidence.” Id. at *21 (citation omitted). The Third Circuit’s opinion contains a discussion of the difference between the predominance requirement and the ascertainability requirement – the latter being “whether individuals fitting the class definition may be identified without resort to mini-trials.” Id. at *20. The district court held that plaintiffs failed to satisfy either requirement, while the Third Circuit focused more on predominance.
After examining several factual scenarios presented by defendant’s expert that would amount to overbilling, but not necessarily unjust or fraudulent overbilling (indeed some plaintiffs had received refunds), the Third Circuit agreed with the district court’s conclusion that
individual inquiries would be required to determine whether an alleged overbilling constituted unjust enrichment for each class member. Such specific evidence is incompatible with representative litigation.
Id. at *23.
And so falls another proposed class action.