In 2012, California resident Ronald Perras brought suit in federal district court against H&R Block and its affiliates (H&R), which are headquartered in Kansas City, Missouri. Perras alleged that H&R violated the Missouri Merchandising Practices Act (MMPA) by charging its customers compliance fees in excess of H&R’s actual cost of complying with new federal regulations. Perras sought to define a class of all persons in all states except Missouri who had purchased tax services from H&R and paid the compliance fees during 2011 and 2012.
Perras attempted to ground certification on Rule 23(b)(3)—i.e., common questions of law or fact “predominate over any questions affecting only individual members” and “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Perras argued that the class could uniformly rely on Missouri law because that is where H&R has its principal place of business and made the decision to adopt the compliance fees at issue. The federal district court denied his motion to certify the class and the Eighth Circuit affirmed.
The denial of certification below and the affirmance of that decision on appeal both focused on a choice-of-law question: whether the MMPA applied uniformly to all of the nationwide class members’ causes of action or whether, instead, the claims at issue would be governed by the consumer protection law of the given member’s particular state of residence. The district court relied on rules of constitutional law, focusing on due process and full faith and credit, to conclude that the MMPA did not apply uniformly to all of these nationwide claims, and thus, predominance was absent.
The Eighth Circuit reached the same result but without the need to resort to constitutional law. It relied on the maxim that constitutional issues should be avoided where possible and, instead, ruled that predominance was lacking based on its Erie prediction that the Missouri Supreme Court would enforce the MMPA’s plain text and limit its scope to “trade or commerce . . . in or from the state of Missouri.” The appellate court thus reasoned that the Missouri Supreme Court would not apply the MMPA to the out-of-state transactions at issue in this putative nationwide class action: these “transactions … took place outside of Missouri between representatives of H&R located outside of Missouri and consumers who reside outside of Missouri.”
As the Eighth Circuit held, the “law applicable to each class member would be the consumer-protection statute of that member’s state.” Therefore, the governing substantive law would vary from consumer to consumer, and hence, predominance was lacking. Accordingly, there was no need to reach the issue of superiority.