In Grandalski v. Quest Diagnostics Inc., --- F.3d ---, 2014 WL 4455034 (3d Cir. Sept. 11, 2014), the Third Circuit upheld the denial of class certification in a lawsuit where plaintiffs asserted dozens of state consumer fraud claims along with unjust enrichment claims, finding the district court correctly determined such claims required individualized treatment.
Plaintiffs alleged that defendant improperly overbilled patients for diagnostic and clinical testing. Plaintiffs sought to certify a class of all persons overbilled by defendant, asserting multiple causes of action on behalf of the proposed class including violation of dozens of state consumer fraud laws and unjust enrichment. The district court denied class certification: finding application of numerous different state consumer fraud statutes would be "unwieldy and inappropriate for class treatment at trial." 2014 WL 4455034, at *1. The district court further held that "the evidentiary showing required for each class member to show unjust enrichment would be highly individualized" and accordingly denied certification as to that claim.
The Third Circuit upheld the denial of class certification. First, the court held that the law of each consumer's domicile governed the claims at issue. Second, the court rejected plaintiffs' proposed grouping of the state consumer fraud statutes into two categories -- those proscribing "unfair or deceptive" conduct and those prohibiting false or misleading conduct -- recognizing that while "grouping, in general, may be a permissible approach to nationwide class action litigation, in this case [plaintiffs] did not provide enough information or analysis to justify the certification of the classes they proposed." Id. at * 7. Plaintiffs failed to carry their burden of showing the proposed grouping was workable because they merely asserted that the state law differences were "insignificant," but failed to provide analysis showing this was true. Third, as to the unjust enrichment claims, the Third Circuit held that the district court "properly found that individual inquiries would be required to determine whether an alleged overbilling" was unjust for each class member by providing expert testimony on this issue, and "[s]uch specific evidence is incompatible with representative litigation." Id. at *8.
The Grandalski decision is a welcome one to defendants resisting multi-state class certification of consumer fraud claims. No doubt plaintiffs will characterize it as a narrow decision based on the failure of the particular litigants to supply adequate proof that "grouping" by state law was feasible. But the court properly emphasized that -- outside of the settlement context where a class is to be tried -- "plaintiffs face a significant burden to demonstrate that grouping is a workable solution." Id. at *7 (citations omitted).