On November 5, 2013, the Supreme Court of Ohio handed down a merit decision in Cullen v. State Farm Mut. Auto Ins. Co., 2013-Ohio-4733. In a 5-2 decision written by Justice O’Donnell, the Court held that class certification was improper in the case. In an earlier post, I set forth the line-up of the justices and case syllabus, but promised a more thorough review from one of my civil procedure colleagues who knows far more about this subject than I do. This guest post by Professor Sandra Sperino provides that analysis.
Professor Sperino’s Analysis of the Cullen case
In this case, a named plaintiff sought class certification of a class of current and former State Farm auto insurance policyholders who received chemical filler or patch repairs for their windshields. The plaintiff alleged that when a policyholder reported a chipped windshield, the insurer failed to disclose all available insurance benefits to the policyholder. The plaintiff asserted numerous claims against the defendant, including breach of contract and breach of fiduciary duty.
The Supreme Court opinion focused on the propriety of class certification. Reversing the trial court and the appeals court, the Supreme Court held that the named plaintiff did not meet the requirements for proving class certification under Civ.R. 23. The opinion focused on two subsections of Civ.R. 23, subsections (B)(2) and (B)(3). The Court held the plaintiff failed to meet the class certification requirements under either of these subsections.
To certify a class, the named plaintiff is responsible for establishing required elements under Civ.R. 23. These requirements are divided into two major sections: requirements under 23(A) and requirements in 23(B). A plaintiff is required to establish all of the required factors under 23(A). Then, the plaintiff must establish that the class is proper under one of the options provided by 23(B). The Cullen case did not consider the Rule 23(A) factors, but rather, focused on the requirements of Rule 23(B). The plaintiff asserted that the class could be certified under both 23(B)(2) and (B)(3).
Under subsection (B)(2) certification is proper if “the party opposing the class has acted . . . on grounds generally applicable to the class, thereby making appropriate final injunctive or corresponding declaratory relief with respect to the class as a whole.” Subsection (B)(3) allows certification if common questions of law or fact predominate over questions affecting individual members. The Supreme Court held that the plaintiff could not proceed under either of these subsections and denied class certification.
The Ohio Supreme Court’s opinion relied heavily on the reasoning of the United States Supreme Court in Wal-Mart v. Dukes, 131 S.Ct. 2541 (2011). In Dukes, the U.S. Supreme Court considered whether to certify a nationwide class of female Wal-Mart employees. The plaintiffs alleged that Wal-Mart discriminated against female employees in its compensation and promotion practices. Even though the Dukes decision interpreted the Federal Rules of Civil Procedure, the Ohio Supreme Court relied on this decision, given the similarities between the federal rules and the Ohio rules.
Importantly, it is unclear whether the portions of the Dukes decision used by the Ohio Supreme Court represent the actual holding of Dukes or dicta. In Dukes, the U.S. Supreme Court determined that the class could not be certified under Fed.R.Civ.P. 23(a), but then also rejected the class under Rule 23(b). The discussion regarding Rule 23(b) was not necessary to decide the case, because the holding that the plaintiffs did not meet the Rule 23(a) requirements was sufficient to resolve the case. The Cullen case cited portions of the Dukes opinion relating to Rule 23(b) requirements.
The Cullen case presents this same dilemma in that it is difficult to determine which portions of the case represent the holding and which are dicta. On each ground, the Court relied on multiple arguments to deny certification. The opinion’s syllabus does not fully recite each of these arguments, and the rationales it does contain are not presented in their full depth and complexity.
Two facets of the Dukes case are important to the Cullen case: (1) its analysis regarding the effect of monetary damages on certification under (b)(2); and (2) its discussion regarding whether a court should consider the underlying merits of the case in making a certification decision.
The Dukes Court stated that (b)(2) certification is not appropriate where the primary relief sought is monetary damages, rather than injunctive or declaratory relief. The Ohio Supreme Court reasoned that certification was improper in Cullen because the Court characterized the primary relief sought as individualized claims for monetary damages.
This argument depends on how the judges chose to frame the underlying request for relief. In was possible to characterize the requested declaratory relief as central to the plaintiff’s relief. A declaration of a legal violation would lay an important legal foundation to the claims for money damages. The Cullen Court rejected this reasoning, noting that “claims for declaratory relief that merely lay a foundation for subsequent determinations regarding liability or that facilitate an award of damages do not meet the requirement for certification.”
In Cullen, the Court left open the possibility that future cases seeking monetary damages could be certified under (B)(2) if the monetary damages are merely incidental to declaratory or injunctive relief. However, the Court noted that the Dukes case cast doubt on a line of cases that interpreted Fed.R.Civ.P. 23(b)(2) in this way. After Cullen, the question of whether incidental claims for monetary damages can be sought under (B)(2) remains open.
The most important part of the Cullen case is its blurring of the lines between class certification and merits determination. In Dukes, the Supreme Court emphasized that class certification requires inquiry into the merits of the case. The Cullen Court too emphasized that lower courts must resolve factual disputes relevant to each Rule 23 requirement and to interrogate the merits of the underlying dispute.
In determining whether the plaintiff could establish the requirements for certification under (B)(3), the Ohio Supreme Court noted that it is not enough for the plaintiff to present a colorable claim. The Court wrote: “Cullen had to demonstrate, and the trial court had to find, that questions common to the class in fact predominate over individual ones, and proof of predominance necessarily overlaps with proof of the merits of this case.”
In so holding, the Court stated that it was clarifying its earlier decision in Ojalvo v. Board of Trustees of Ohio State Univ., 12 Ohio St.3d 230, 233, 466 N.E.2d 875 (1984). The syllabus of Ojalvo stated: “A court abuses its discretion in denying certification of a class action when it requires a certainty that a common issue of fact ‘probably exists’ based on the merits of the class claim.” In Cullen, the Court noted that the trial court was required to consider the merits of the underlying claim to the extent necessary to determine whether the requirements of Rule 23 are met. The Cullen Court further explained: “[D]eciding whether a claimant meets the burden for class certification pursuant to Civ.R. 23 requires the court to consider what will have to be proved at trial and whether those matters can be presented by common proof.”
This discussion heavily suggests that judges deciding class certification motions are legally required to determine whether the plaintiffs’ claims are more than colorable and possess some level of undefined merit. It is unclear exactly what kind of merits inquiry trial court judges should be undertaking and how much deference (if any) the judge must give the plaintiffs’ allegations or evidence.
Justice O’Neill filed a dissenting opinion, which Justice Pfeiffer joined. The dissent argued that the majority opinion failed to give the trial court judge the deference due under the abuse of discretion standard. The dissent also criticized the majority for tacitly overruling Ojalvo and leaving uncertainty about how judges are to conduct the appropriate merits review in future certification determinations.
Concluding Observations by Professor Bettman
While I’ve said I don’t know much about class actions, based on this decision and the earlier one in Stammco, L.L.C., v. United Tel. Co. of Ohio, 2013-Ohio-3019, I’d say the future of class actions in Ohio looks pretty grim. From what I understand, this is also true nationwide.
As I noted after the argument, a majority of the justices seemed to feel that the entire situation just seemed too unwieldy . But as I also noted, the trial judge put in a massive amount of work on this case, and appeared to address the merits to determine certification to the extent the U.S. Supreme Court had deemed necessary. So a reversal on abuse of discretion is a hard pill to swallow in this case.
After the argument my student contributor on the case, Greg Kendall, wrote “ultimately, the Court was skeptical that plaintiff has met his burden here, especially on issues of manageability and determining who is in the class.”