The Pennsylvania Supreme Court has unanimously reaffirmed the principle that consumer claims requiring fact-intensive, individualized inquiries are not amenable to class certification. In Basile v. H&R Block, Inc., decided on September 7, 2012, the court expressly rejected “the tendency toward sanctioning the use of class actions as a convenience to address colorably meritorious claims in an aggregate fashion,” despite acknowledging that such claims “might not otherwise be capable of being redressed practically on an individualized basis.”
The 19-year procedural history in Basile is, as the court described it, “lengthy” and “circuitous.” Basile was one of several class actions brought against H&R Block in the 1990s targeting its “Rapid Refund” program, whereby customers could receive the amount of their income tax refunds as a short-term high-interest loan to be repaid upon receipt of the refund. Basile filed her putative class action suit against H&R Block in 1993, alleging, among other things, that it had a confidential relationship with its unsophisticated customers regarding the Rapid Refund program and that it improperly exploited that relationship by steering those customers into that program without disclosing material information regarding the loans, including the very high interest rate.
Although a class was certified initially, the trial court ultimately decertified it. The court reasoned that common issues no longer predominated because proving the existence of a confidential relationship would require individualized inquiries into whether each of the 600,000 class members had the requisite trust in H&R Block's expertise. In 2010, the Superior Court reversed that order, reasoning that proof of complete trust was not necessary to show a confidential relationship. It also found that plaintiffs had proffered enough evidence regarding “overmastering influence” to create a jury question that was common to the class.
The Pennsylvania Supreme Court disagreed and reinstated the trial court's decertification ruling. The court concluded that the confidential relationship inquiry, whether focused on “overmastering influence” or trust, was unavoidably individualized and fact-intensive, and “it is not appropriate to presume that Block’s marketing and customer relations strategies had the same impact on each and every putative class member.”
Significantly, the Supreme Court acknowledged that programs like Rapid Refund “have engendered intense criticism from consumer advocates and others,” but stated that “[t]he proper judicial response … is not to retroactively alter the procedural class action device or governing principles of appellate review to achieve [regulatory] ends.” The court concluded that “the Superior Court's concern with the impact of mass marketing and fringe banking practices on the financially disadvantaged” was outweighed by the “limitations inherent in the judicial rulemaking process … the impact of collectivized treatment of individualized claims on defendants’ substantive rights … and the limited policymaking role of the courts (as compared with the legislative branch) in terms of manipulating substantive law.”