Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-4_07-cv-00019/USCOURTS-ared-4_07-cv-00019-3/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

---

1

 Counsel has notified the Court that the parties have reached a settlement in principle of

the claims related to the proposed Mr. Rescue class and will be filing a joint motion in the near

future. Therefore, the Court will not address the motion to certify that class.

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

HEATHER TYLER, Individually PLAINTIFF

and on Behalf of All Other Persons Similarly Situated

v. Case No. 4:07CV00019 JLH

ALLTEL CORPORATION and ALLTEL

COMMUNICATIONS, INC. DEFENDANTS

OPINION AND ORDER

Heather Tyler commenced this action against Alltel Corporation and Alltel Communications,

Inc. (collectively, “Alltel”), seeking to represent nationwide classes consisting of persons who were

charged an early disconnect fee and persons who were enrolled in a roadside assistance program

without their consent. Pending before the Court are the following motions: Tyler’s motion for leave

to file a second amended complaint; Alltel’s motion to strike Tyler’s class allegations; Tyler’s

separate motions for class certification of the “Mr. Rescue Automatic Charge Class”1

 and the “Early

Disconnect Penalty Classes”; and Tyler’s motion to strike the expert testimony of Prof. Jerry

Hausman. Tyler’s motions for class certification were filed on May 8, 2009, and a class certification

hearing was held on July 31, 2009. For the following reasons, Tyler’s motion for certification of the

early disconnect penalty class is denied. Tyler’s motion to strike the expert testimony of Hausman,

Tyler’s motion for leave to file a second amended complaint, and Alltel’s motion to strike Tyler’s

class allegations are denied as moot.

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 1 of 24
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 Since the commencement of this action, Alltel has merged into Verizon Wireless.

2

I.

Tyler’s complaint alleges that she and other similarly situated plaintiffs were injured by Alltel

forcing them to pay an early disconnect penalty.

Alltel was a wireless telecommunications company.2

 According to Tyler’s complaint, Alltel

offered its customers various service plans, some of which were “post-pay” plans and some of which

were “pre-paid” plans. Under the pre-paid plans, customers were committed to their respective plans

for a certain period of time and were obligated to pay an early disconnect penalty if they terminated

their contract before the end of its term. The early disconnect penalty for early termination was

typically $200. The contract term and early disconnect penalty were stated in the written contract.

Alltel asserts that its contract conspicuously displayed the contract start date, the contract end date,

and the early disconnect penalty amount. Alltel also asserts that customers had to sign the contract,

acknowledging that they understood and accepted its terms and conditions, including the early

disconnect penalty, and that customers were provided a copy of the contract.

In November 2003, Tyler purchased a telephone and wireless service plan from Alltel. In

March 2006, she cancelled her service with Alltel prior to the completion of her contract term, and

Alltel imposed the $200 early disconnect penalty. Tyler says that she never signed a contract or

otherwise agreed to pay the early disconnect penalty. She says that Alltel has been unable to produce

the written contract that she supposedly signed or other evidence indicating that she agreed to a twoyear service agreement. After Tyler contested the validity of the early disconnect penalty, Alltel

imposed a late payment fee in addition to the penalty. Tyler contacted both the Better Business

Bureau of Arkansas and the Arkansas Attorney General’s office. Alltel continued to add late fees

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 2 of 24
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and taxes, and Tyler says that Alltel threatened to retain an outside collection agency to collect the

penalty and late fees. In July 2006, Tyler paid under protest the balance of the penalty and the

related charges.

Tyler stated in deposition testimony, and she reiterated in her testimony at the class

certification hearing, that she did not recall the details of her interactions with an Alltel sales

representative when she entered into the contract; that she does not remember whether she initiated

service at an Alltel store or through a kiosk; that she does not recall whether she was given or signed

any documents at that time; and that she otherwise has no recollection of what she was and was not

told when she initiated service in May 2003. In September 2004, Tyler upgraded her wireless

device, which Alltel says resulted in a twenty-four month contract extension. Alltel says that the

twenty-four month contract extension resulted in her being able to purchase the upgraded wireless

device at a deep discount.

In August 2006, Alltel began supplementing its wireless contracts with a document called

“My Info,” which prominently displayed the contract length, contract start date, contract end date,

and the early disconnect penalty in a section called “Contract Summary.” Alltel says that its sales

representatives were trained to review key features, the contract length, and the early disconnect

penalty with all of Alltel’s customers. Alltel says it trained its representatives, provided them with

checklists, and monitored their representatives to ensure that all proper disclosures were being made

to the customers. Starting in May 2005, customers no longer signed contracts because Alltel

transitioned to a paperless contract system that included the My Info disclosures as well as a

“Welcome Guide,” which explained the various features and the early disconnect penalty.

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 3 of 24
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 The complaint lists Michigan as one of the twenty-five states in which putative class

members reside, but it does not list Michigan’s consumer protection statute along with the other

twenty-four states’ consumer protection laws.

4

 In their respective arguments, both parties have also referred to the early disconnect

penalty as an “early termination fee” or “ETF.” The ETF or EDP label is not a determinative

factor in the Court’s decision, so the Court will hereinafter refer to an early disconnect penalty, as

that is the label used in Tyler’s proposed class definitions.

4

II.

Tyler’s complaint asserts claims based on three legal theories: unjust enrichment, unfair and

deceptive business practices in violation of the Arkansas Deceptive Trade Practices Act, and unfair

and deceptive business practices in violation of other class jurisdictions’ consumer protection

statutes. The putative class members reside in the following twenty-five states: Alabama, Arizona,

Arkansas, Colorado, Florida, Georgia, Kansas, Kentucky, Louisiana, Michigan, Mississippi,

Missouri, Nebraska, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South

Carolina, Tennessee, Texas, Virginia, West Virginia, and Wisconsin. Tyler alleges that Alltel

violated the consumer protection laws of Arkansas and the other class jurisdictions3

 by charging and

collecting an early disconnect penalty from its customers.4 Tyler says that the early disconnect

penalty is designed to penalize and hold its customers hostage; is assessed without a justifiable basis;

is assessed without adequate disclosure of all its applicable material terms and conditions; and is

excessive for any actual damage experienced by Alltel when a customer cancels service.

Tyler moves for certification of the early disconnect penalty payor class under Federal Rule

of Civil Procedure 23(a) and (b)(3), and for certification of the early disconnect penalty current

subscriber class under Rule 23(a) and (b)(2).

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 4 of 24
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Tyler defines the proposed classes as follows:

Early Disconnect Penalty Payor Class.

All Alltel wireless and/or communication services customers who subscribed to and

activated an Alltel service plan, and who have been charged for and paid charges

associated with Alltel’s “early disconnect penalty” and/or “early termination fee”

within the past five years immediately preceding the date of the filing of this action

to present. Excluded from this class are: (1) any person, firm, trust, corporation or

other entity related to or affiliated with Alltel; (2) all currently serving federal district

court judges, their current spouses, and all persons (and their current spouses) within

the third degree of consanguinity to such federal district court judges and spouses;

(3) claims by any person or entity who timely opts out of this proceeding; and (4) any

person who has given a valid release concerning the claims asserted in this suit.

Hereafter, this class will be referred to as the “early disconnect penalty payor class.”

Early Disconnect Penalty Current Subscriber Class.

All current Alltel wireless and/or communication services customers who subscribed

to and activated an Alltel service plan, and who will be charged for Alltel’s “early

disconnect penalty.” Excluded from this class are: (1) any person, firm, trust,

corporation or other entity related to or affiliated with Alltel; (2) all currently serving

federal district court judges, their current spouses, and all persons (and their current

spouses) within the third degree of consanguinity to such federal district court judges

and spouses; (3) claims by any person or entity who timely opts out of this

proceeding; and (4) any person who has given a valid release concerning the claims

asserted in this suit. Hereafter, this class will be referred to as the “early disconnect

penalty current subscriber class.”

In both her original and amended complaints, Tyler included a carve-out provision that

excluded from her class allegations “any person included in the class defined in the case of Peter

Rosenow v. Alltel, et al., Saline County Circuit Court, Third Division, Case No. Civ. 2006-182 (other

Arkansas residents who have been charged fees associated with Alltel’s ‘early disconnect penalty’

or ‘early termination fee.’).” After the Saline County Circuit Court denied certification in Rosenow,

Tyler filed a motion for leave to file a second amended complaint, in which the carve-out provision

for Arkansas residents is removed. Tyler’s motion for class certification defines the early disconnect

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 The Arkansas Supreme Court recently reversed the Saline County Circuit Court’s denial

of certification, holding that the circuit court abused its discretion by delving into the underlying

merits of the case. Rosenow v. Alltel, 2010 Ark. 26, --- S.W.3d ---. The Supreme Court’s

decision does not control the dispositive issues in this case. Whereas Rosenow involved only an

Arkansas class of plaintiffs, this case involves plaintiffs from twenty-five different states. The

Supreme Court was not confronted with the conflicts of law issues that present themselves here. 

As explained below, those issues preclude class certification.

Even apart from the choice-of-law issues presented here and not in Rosenow, Rosenow

would not have preclusive effect. This Court’s certification analysis under Federal Rule 23

would differ from the analysis required by the Arkansas Supreme Court. For an overview of the

differences in application of Federal and Arkansas Rule 23, see General Motors Corp. v. Bryant,

374 Ark. 38, 42, 46-47, 285 S.W.3d 634, 638, 641 (2008); John J. Watkins, A “Different” Top

Ten List: Significant Differences Between State and Federal Procedural Rules, THE ARKANSAS

LAWYER, Winter 2010, at 14-15; F. Ehren Hartz, Certify Now, Worry Later: Arkansas’s Flawed

Approach to Class Certification, 61 ARK. L. REV. 707 (2009).

6

penalty payor class as if the Court will grant her motion for leave to amend, as her class definition

does not contain the carve-out provision.5

III.

When a putative class consists of persons from numerous states pursuing common law

claims, a court must conduct a choice-of-law analysis before considering the requirements of

Rule 23.

Unlike a federal question case (where diversity of the parties does not matter), when

class certification is sought in a case based on common law claims, the question of

which law governs is crucial in making a class certification determination. Not only

must the choice-of-law issue be addressed at the class certification stage - it must be

tackled at the front end since it pervades every element of [Rule] 23.

[Rule] 23 makes no reference to choice-of-law issues, but, in nationwide class

actions, choice-of-law constraints are constitutionally mandated because a party has

a right to have her claims governed by the state law applicable to her particular case.

Therefore, choice-of-law issues may be present in any number of [Rule] 23's

subsections . . . .

. . . [W]here multi-state plaintiffs pursue common law causes of action under both

23(b)(2) and (b)(3)[,] the choice-of-law determination affects every aspect of class

certification. Plaintiffs’ common law claims are not insulated from the choice-of-law

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 6 of 24
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analysis simply because they are grouped under 23(b)(2). Accordingly, [p]laintiffs

must show, prior to class certification, that the differences in state laws within each

of their groupings are nonmaterial as to both their 23(b)(3) and 23(b)(2) classes.

In re Prempro, 230 F.R.D. 555, 561-62 (E.D. Ark. 2005) (internal citations omitted).

A. CONFLICT OF LAWS

In both briefing and oral arguments, counsel for Tyler has admitted that state consumer

protection laws contain outcome-determinative differences and vary considerably. That admission

follows Eighth Circuit precedent. In In re St. Jude Medical, Inc., 425 F.3d 1116 (8th Cir. 2005), the

Eighth Circuit noted that “[s]tate consumer-protection laws vary considerably, and courts must

respect these differences rather than apply one state’s law to sales in other states with different

rules.” In re St. Jude, 425 F.3d at 1120 (quoting In re Bridgestone/Firestone, Inc., 288 F.3d 1012,

1018 (7th Cir. 2002)); see also Mooney v. Allianz Life Ins. Co. of N. Am., 244 F.R.D. 531, 534-35

(D. Minn. 2007) (finding that outcome-determinative conflicts existed between various states’

consumer protection statutes). Tyler, however, contends that the Court should apply the Arkansas

Deceptive Trade Practices Act to her class claims, including the claims of putative class members

from other states.

Although Tyler agrees that the consumer protection laws of the states are materially different,

she denies that the law of unjust enrichment is substantially different in different states. In support

of that argument, Tyler relies almost solely on In re Mercedes-Benz Tele Aid Contract Litigation,

257 F.R.D. 46 (D. N.J. 2009). There, the District of New Jersey held that there are minor variations

in the elements of states’ unjust enrichment laws, but “those differences are not material and do not

create an actual conflict.” In re Mercedes-Benz, 257 F.R.D. at 58. In reaching that conclusion, the

district court relied on another case from the District of New Jersey and a case from the Eastern

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 The district court also held that, even if states’ unjust enrichment laws were in conflict,

the relevant choice-of-law analyses would dictate application of New Jersey law to the

nationwide claims. 

8

District of Pennsylvania. The Mercedes court thus determined that no material conflict of law

existed, so it applied New Jersey law to the nationwide class.6

 Id.

Tyler acknowledges that other courts have held that the law of unjust enrichment varies

materially from state to state. See Mooney, 244 F.R.D. at 534 (“Because of the outcome of the

choice-of-law analysis below, it is unnecessary to determine the precise number of outcomedeterminative conflicts . . . between Minnesota unjust enrichment law and unjust enrichment law in

other jurisdictions. It is sufficient to recognize that conflicts exist.”); In re Baycol Products

Litigation, 218 F.R.D. 197, 214 (D. Minn. 2003) (“Plaintiffs have not provided the Court sufficient

information for it to conclude that the laws concerning unjust enrichment . . . are not significantly

or materially different. Plaintiffs have thus failed to demonstrate that common issues of law

predominate.”). Tyler urges the Court to adopt the reasoning found in In re Mercedes-Benz and hold

that any differences are not material and thus do not create actual conflict.

Tyler’s argument is contrary to two decisions of this Court: In re Prempro and Thompson v.

Bayer Corp., 2009 WL 362982 (E.D. Ark. Feb. 12, 2009). In Thompson, the court compared

Arkansas’s unjust enrichment law with other states. After considering case law from around the

country on unjust enrichment, the court concluded that there are material conflicts between the law

of unjust enrichment in Arkansas and the law of unjust enrichment in other states with respect to

whether a wrongful act is required on the part of the party unjustly enriched, whether the enrichment

must have come directly from the plaintiff to the defendant, and whether an unjust enrichment claim

can survive if the plaintiff has an adequate remedy at law. Thompson, 2009 WL 362982, at *4-6

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 8 of 24
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(collecting cases). Because of the material conflicts in states’ unjust enrichment laws, the court

found that the plaintiff failed to satisfy the requirements of superiority and predominance. Id. at *8.

Likewise, in In re Prempro, the district court found that the law of unjust enrichment varied

significantly from state to state. In re Prempro, 230 F.R.D. at 563 (citing Clay v. Am. Tobacco Co.,

188 F.R.D. 483, 501 (S.D. Ill. 1999) (“The actual definition of ‘unjust enrichment’ varies from state

to state.”); In re Baycol, 218 F.R.D. at 214 (“Plaintiffs have not provided the Court sufficient

information for it to conclude that the laws concerning unjust enrichment . . . are not significantly

or materially different.”). For the proposition that the law of unjust enrichment varies materially,

see also In re Conagra Peanut Butter Products Liability Litigation, 251 F.R.D. 689, 697 (N.D. Ga.

2008) (“This morass is useful to establish not only the lack of uniformity of unjust enrichment claims

across the country, but also the inferiority of class-wide resolution due to discerning the many

differing legal standards.”); Vulcan Golf, LLC v. Google Inc., 254 F.R.D. 521, 533-34 (N.D. Ill.

2008) (“[A]s noted by the significant weight of authority detailed above, the differences in the unjust

enrichment laws are sufficiently substantive to preclude class certification.”); Clay v. Am. Tobacco

Co., 188 F.R.D. 483, 501 (S.D. Ill. 1999) (because “variances exist in state common laws of unjust

enrichment,” “the claim of unjust enrichment is packed with individual issues and would be

unmanageable”).

The Court is convinced by the reasoning found in Mooney, In re Prempro, and Thompson.

The law of unjust enrichment varies from state to state in material respects. As noted, Tyler does

not dispute that other states’ consumer protection laws contain material differences. Therefore, the

Court concludes that the laws of the states in which putative class members reside differ materially.

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 9 of 24
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Therefore, the Court must decide whether Arkansas law would apply to the claims of all of the

putative class members, including those who reside in states other than Arkansas.

B. CHOICE-OF-LAW ANALYSIS

Federal courts sitting in diversity apply the forum state’s choice-of-law rules. See Mooney,

244 F.R.D. at 535 (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S. Ct. 1020,

85 L. Ed. 1477 (1941)); see also Simpson v. Liberty Mut. Ins. Co., 28 F.3d 763, 764 (8th Cir. 1994)

(“Federal district courts must apply the choice-of-law rules of the state in which they sit when

jurisdiction is based on diversity of citizenship.”). 

At the outset, the parties disagree as to what choice-of-law analysis the Court should employ.

Tyler argues that the Court should apply the familiar Leflar choice-influencing factors to its claims,

which she says are essentially tort claims. Alltel, however, counters with three points: (1) Alltel’s

service agreements contain a controlling choice-of-law provision; (2) even if the contractual

provision does not control, Tyler’s claims are essentially contractual in nature, meaning that the

Court should apply Arkansas’s “most significant relationship” test; and (3) even if tort choice-of-law

principles should apply, those principles dictate that Arkansas does not apply to the claims of nonArkansas putative class members.

Whether Tyler’s claims sound in contract or tort, the result is the same. If her claims sound

in contract, then both the choice-of-law provision in the contract and general contract choice-of-law

principles require that consumer transactions be governed by the law of the state in which the

transaction occurred or the state in which the consumer’s billing address is located. If her claims

sound in tort, then under Arkansas’s tort choice-of-law principles—including lex loci delicti and the

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 Tyler says that she attached the agreement to her original complaint only as an example

of the language upon which Alltel relied in charging its customers an early disconnect penalty,

not as an example of a binding contract into which she and other Alltel customers entered.

11

Leflar choice influencing factors—the laws of twenty-five different states would still apply because

the claims arise out of consumer transactions that occurred in different states.

1. Contractual Choice-of-Law Provision

Attached as an exhibit to Tyler’s original complaint is a copy of Alltel’s terms and conditions

agreement.7

 The agreement contains the following section on applicable law:

Applicable Law

Your Agreement and Alltel’s provision of Services to you are subject to (a) the laws

of the state identified in the billing address that you have provided us and (b) any

applicable federal or state laws.

Under Arkansas law, in a dispute in an action arising in contract where the law of more than

one state might apply, a court must first look to see if there has been an effective choice of law

before conducting the most significant relationship test. Crisler v. Unum Ins. Co. of Am., 366 Ark.

130, 133, 233 S.W.3d 658, 660 (2006). Tyler argues that her claims arise in tort, not in contract, so

any contractual choice-of-law provision is irrelevant. Alltel says that this choice-of-law provision

shows that customers have agreed that disputes arising out of the terms and conditions agreement

are governed by the laws of the state identified in the provided billing address.

The Arkansas Commercial Code provides:

Except as provided in this section, when a transaction bears a reasonable relation to

this state and also to another state or nation, the parties may agree that the law either

of this state or of such other state or nation shall govern their rights and duties.

Failing such agreement this subtitle applies to transactions bearing an appropriate

relation to this state.

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At the time of the Evans opinion, this statutory language could be found at ARK. CODE

ANN. § 4-1-105(1) (Supp. 1997). The language in the 1997 and present versions is the same, but

the Court has provided the most current citation.

9

 There is little evidence in the record as to where payments were sent. A bill dated

April 5, 2006, is attached to Tyler’s complaint, and that bill shows that payments were to be sent

to Lexington, Kentucky. The Court does not consider that factor to be significant in the context

of this case.

12

ARK.CODE ANN. § 4-1-301(1). Relying on the Arkansas Commercial Code, the Arkansas Supreme

Court in Evans v. Harry Robinson Pontiac-Buick, Inc., held that a retail installment contract that

stated that the contract would be “governed by the law of the State of Texas” was governed by the

State of Texas because a reasonable relationship existed between the transaction and Texas.8

 The

court said that in determining whether a reasonable relationship exists a court should consider where

the transaction originated, where payments were sent, and where the contracting parties were located

in the contract. Evans v. Harry Robinson Pontiac-Buick, Inc., 336 Ark. 155, 163, 983 S.W.2d 946,

950 (1999).

At the heart of this case are thousands of individual consumer transactions originating in the

respective home states of the individual putative class members. Although Alltel had its home

offices in Arkansas, it had a presence in and conducted business in each of the states in which

putative class members reside, so both contracting parties were located in the respective state in

which each transaction originated. By virtue of the choice-of-law provision in the agreement, Alltel

and its customers agreed that their agreement would be governed by the laws of the state of the

customer’s billing address.9 Because there is a reasonable relationship between the transaction and

the state of the customer’s billing address, that choice-of-law provision is enforceable.

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 12 of 24
10 We say “for the most part” because it is likely that some consumers purchased wireless

service contracts in states where they did not reside, especially consumers living near a state

boundary. Whether or not some of the consumers purchased their wireless services across a state

boundary does not affect the analysis.

13

2. Contract Choice-of-Law Principles

Alltel argues that, even if the contractual choice-of-law provision is not enforceable,

Arkansas courts would apply the most significant relationship test to Tyler’s claims because they

really arise in contract. Again, Tyler disagrees and asserts that her claims arise in tort, not contract,

so the Court should apply Leflar’s choice-influencing factors as found in Wallis v. Mrs. Smith’s Pie

Co., 261 Ark. 622, 629, 550 S.W.2d 453, 456 (1977). Wallis, which involved an action sounding

in tort, does not apply to actions arising ex contractu. See Whirlpool Corp. v. Ritter, 929 F.2d 1318,

1321 (8th Cir. 1991).

Where there is no effective choice of law by the parties in a cause of action arising in

contract, Arkansas courts employ the “most significant relationship” test to determine which state’s

laws to apply. Crisler, 366 Ark. at 133, 233 S.W.3d at 660. Under that test, a court must consider

“the nature and quantity of each state’s ‘contacts’ with the transaction at issue.” Snow v. Admiral

Ins. Co., 612 F. Supp. 206, 209 (W.D. Ark. 1985). The following factors are relevant: (1) the place

of contracting; (2) the place of negotiation of the contract; (3) the place of performance; (4) the

location of the subject matter of the contract; and (5) the domicile, residence, nationality, place of

incorporation and place of business of the parties. Id. (citing RESTATEMENT (SECOND) OF CONFLICT

OF LAWS § 188 (1971)). In this case, for the most part, the place of contracting would have been

each customer’s respective home state.10 The contract negotiations would have occurred, for the

most part, in each customer’s respective home state. The contracts were performed in each

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customer’s respective home state. Although it may be difficult to define the location of the subject

matter of a contract for wireless service, it is reasonable to assume that customers use their wireless

telephones primarily in the states in which they reside. Finally, although Alltel is incorporated in

Arkansas, it conducted business in each of the twenty-five states in which the putative class members

reside. Therefore, consideration of the five factors in the most significant relationship test supports

the conclusion that the Court should apply the laws of the states in which each respective customer

resided, which would mean that the laws of twenty-five states would be applicable to the class

claims.

3. Tort Choice-of-Law Principles

Even if the contract’s choice-of-law provision were not broad enough to be controlling, and

even if the Court should apply tort rather than contract choice-of-law principles, application of

Arkansas tort choice-of-law principles would reach the same result. In Wallis v. Mrs. Smith’s Pie

Co., 261 Ark. 622, 550 S.W.2d 453 (1977), the Arkansas Supreme Court adopted Professor Robert

A. Leflar’s five-factor approach to deciding tort choice-of-law questions. See Miller v. Pilgrim’s

Pride Corp., 366 F.3d 672, 674 (8th Cir. 2004). Those factors are: (1) predictability of results; (2)

maintenance of interstate and international order; (3) simplification of the judicial task; (4)

advancement of the forum’s governmental interests; and (5) application of the better rule of law. Id.

Arkansas law has not, however, altogether discarded the traditional approach of lex loci delicti, so

a court “must consider the lex loci delicti rule within the framework of the five Leflar factors.” Id.;

see also Ganey v. Kawasaki Motors Corp., U.S.A., 366 Ark. 238, 251, 234 S.W.3d 838, 847 (2006)

(noting that Arkansas choice-of-law analysis “ha[s] evolved from a simple application of the doctrine

of lex loci delicti into a consideration of both that doctrine and Leflar’s five choice-influencing

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factors”); Gomez v. ITT Educ. Servs, Inc., 348 Ark. 69, 77, 71 S.W.3d 542, 546 (2002) (noting that

“the adoption of the Leflar factors in Wallis and subsequent cases appears to be merely a softening

of what previously had been a rigid formulaic application of the former rule of law”).

i. Lex loci delicti

Tyler argues that conduct in Arkansas has caused injuries in other states, so the laws of

Arkansas should apply to the class claims. The claims of each putative class member, however, are

based on what disclosures were or were not made and to what terms and conditions the customer

actually agreed at the point of sale. Thus, as Tyler admits in her supplemental brief, a strict

application of lex loci delicti would dictate that the law of the state in which the consumer

transaction occurred would govern disputes arising out of that particular consumer transaction.

ii. Predictability of results

The five Leflar factors also point toward application of each class jurisdiction’s respective

laws. First, predictability of results largely points towards application of the laws of the state in

which the customer resides. Professor Leflar has explained:

Predictability of results includes the ideal that parties to a consensual transaction

should be able to know at the time they enter upon it that it will produce, by way of

legal consequences, the same socioeconomic consequences (usually based upon the

assumed validity of the transaction) regardless of where litigation occurs so that

forum-shopping will benefit neither party. They should be able to plan their

transaction as one with predictable results. At least this is an ideal for some kinds of

transactions.

Protection of the justified expectations of parties to a transaction is achieved to the

extent that the results are reasonably predictable in advance. A rule that permits

parties to select at the time of their transaction the state whose law is to govern it

serves this purpose . . . .

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ROBERT A.LEFLAR,LUTHER L. MCDOUGAL III, AND ROBERT L. FELIX,AMERICAN CONFLICTS LAW

§ 103 at 290 (4th ed. 1986) (footnotes omitted). This factor, the predictability of results, “is most

relevant when parties have expectations about the applicable law, such as in ‘consensual transactions

where people should know in advance what law will govern their act’ . . . .” Northwest Airlines, Inc.

v. Astraea Aviation Services, Inc., 111 F.3d 1386, 1394 (8th Cir. 1997) (quoting Milkovich v. Saari,

295 Minn. 155, 203 N.W.2d 408, 412 (1973). A person who enters into a consumer transaction in

his home state may reasonably expect any issues arising from the transaction to be governed by the

laws of his home state. The choice-of-law provision in Alltel’s contracts is consistent with this

expectation, as it calls for application of the laws of the consumer’s home state, rather than some

foreign state the laws of which the consumer is likely to be ignorant. For the same reason, when

Alltel entered into the consumer transaction at issue here, it could reasonably expect that the law of

the consumer’s home state would govern that transaction.

Tyler argues that predictability of results favors application of the law of the place of the

defendant’s conduct, rather than the place of the injury. The cases cited by Tyler are not on point.

For example, in In re Mercedes-Benz, a company with its headquarters in New Jersey failed to

disclose the impending obsolescence of an emergency response system, and it concocted a scheme

at its New Jersey headquarters to continue marketing and promoting the system anyway. In re

Mercedes-Benz, 257 F.R.D. at 50-53. Similarly, in Mooney the Minnesota company’s fraudulent

marketing activities emanated and were sent from Minnesota, so the district court found that

predictability of results favored application of Minnesota law. Mooney, 244 F.R.D. at 536. In this

case, although Tyler’s complaint alleges that Alltel’s corporate headquarters intentionally ignored

the fact that its sales representatives were failing to disclose the early disconnect penalty, any failure

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to disclose or any fraudulent conduct nevertheless occurred at the point of sale where the consumer

spoke personally with a local Alltel representative. As the Court has previously stated, a customer

contracting for Alltel’s services could reasonably expect that the law of his home state would govern

claims relating to that transaction.

iii. Maintenance of interstate order

The next factor, maintenance of interstate order, favors application of the law of the state

with the “more significant relationship to the parties.” Ganey, 366 Ark. at 252, 234 S.W.3d at 847.

In Ganey, an ATV was sold and acquired in Louisiana, the injured party resided in Louisiana, and

the allegations supporting the causes of action occurred outside of Arkansas. The only relationship

to Arkansas was that it was the location of the ATV accident. Therefore, the Arkansas Supreme

Court held that Louisiana had a more significant relationship to the parties than did Arkansas. Id.

at 251-52, 234 S.W.3d at 847. Here, Arkansas does not have a more significant relationship to the

non-Arkansas customers than their respective home states. Interstate order would not be maintained

by applying Arkansas law to consumer transactions into which the parties entered in states other than

Arkansas, especially where the contracts specified that the transactions would be governed by the

laws of the states where the consumers received bills from Alltel.

iv. Simplification of the judicial task

This factor “is not a paramount consideration, because the law at issue does not exist for the

convenience of the court that administers it, but for society and its members.” Schubert v. Target

Stores, Inc., 360 Ark. 404, 411, 201 S.W.3d 917, 922 (2005). When the law of a state other than

Arkansas is outcome-determinative and easy to apply, “there is no good reason not to consider

importing it as the law governing the case.” Id. (citing Gomez, 348 Ark. at 78-79, 71 S.W.3d at 547).

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When each of the consumer transactions is considered individually, this factor favors neither

Arkansas law nor the law of that state where the transaction occurred.

v. The forum’s governmental interest

On the fourth factor, advancement of the forum’s governmental interests, Tyler argues that

Arkansas has an interest in “policing its corporations so as to ‘prevent[] the corporate form from

becoming a shield for unfair business dealing.’” See Mooney, 244 F.R.D. at 537 (quoting CTS Corp.

v. Dynamics Corp. of Am., 481 U.S. 69, 93, 107 S. Ct. 1637, 95 L. Ed. 2d 67 (1987)). While that

may be true, it is not the controlling consideration here. Arkansas does have an interest in policing

its corporations, but the other twenty-four states have an equal or greater interest in policing the

kinds of disclosures and representations made by persons conducting consumer transactions in their

states. States tend to be jealous of their right to protect their own citizens in consumer transactions.

The Wisconsin Consumer Act, for example, expressly invalidates choice-of-law classes in consumer

contracts specifying that the law of another state applies. WISCONSIN STAT. § 421.201(10)(a); Coady

v. Cross Country Bank, 299 Wis. 2d 420, 432, 729 N.W.2d 732, 738 (Wis. App. 2007). Here, the

forum’s governmental interest does not justify applying Arkansas law to consumer transactions

entered into in other states.

vi. The better rule of law

Tyler argues that the final factor, application of the better rule of law, favors application of

Arkansas law because it allows the plaintiffs their day in court, again citing to Schubert for support.

In that case, Louisiana’s workers’ compensation laws barred a suit for negligence against a nonemployer based on negligent conduct that occurred in Arkansas, so application of Louisiana law

would deprive the injured person of his day in court. The Arkansas Supreme Court held that

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Arkansas law was the better rule of law because it did not deprive the injured person of his day in

court. Schubert, 360 Ark. 411-12, 201 S.W.3d at 923. Tyler has not provided, and the Court has

not found, examples of how application of the laws of other states might prevent residents of other

states from obtaining redress in court. The better rule of law factor does not point to the application

of the laws of Arkansas over the laws of the other states.

The balance of the Leflar factors, when considered in the greater context of the lex loci delicti

principle, leads to the conclusion that the law of each state where the consumer transaction occurred,

or where the consumer lives, should govern that transaction. Thus, regardless of which set of choiceof-law principles is applied—the choice-of-law provision in the contract, general contract choice-oflaw principles, or tort choice-of-law principles—the result is the same. Arkansas law will not apply

to transactions between Alltel and customers in other states. Certifying the classes would require

the application of the laws of twenty-five states.

C. RULE 23 CLASS CERTIFICATION STANDARD

To obtain class certification, a plaintiff must meet all four requirements found in Federal Rule

of Civil Procedure 23(a), commonly referred to as numerosity, commonality, typicality, and

adequacy of representation. In addition to the four requirements found in Rule 23(a), a plaintiff must

show that the proposed class action would satisfy one of the three elements in Rule 23(b).

The party seeking class certification bears the burden of showing that certification is

appropriate and the requirements of Rule 23 are met. Coleman v. Watt, 40 F.3d 255, 258 (8th Cir.

1994). Whether to certify a class action is left to the sound discretion of the district court. See id.

at 259. When considering whether to certify a class, “the question is not whether the plaintiff or

plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the

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requirements of Rule 23 are met.” Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178, 94 S. Ct. 2140,

2153, 40 L. Ed. 2d 732 (1974). “The determination that Arkansas law cannot apply to the claims

of the entire class ‘pervades every element of [Federal Rule of Civil Procedure] 23.’” Thompson,

2009 WL 362982, at *7 (quoting In re Prempro, 230 F.R.D. at 561).

1. Rule 23(b)(3)

Tyler moves for certification of the early disconnect penalty payor class under Rule 23(b)(3).

Rule 23(b)(3) requires that common issues predominate over individual issues and that a class action

be superior to other available methods for the fair and efficient adjudication of the controversy. To

show that common issues predominate, plaintiffs must show that their claims can be proven on a

systematic, class-wide basis. In re Prempro, 230 F.R.D. at 566 (quoting Blades v. Monsanto Co.,

400 F.3d 562, 569 (8th Cir. 2005)). This requirement “tests whether the proposed classes are

sufficiently cohesive to warrant adjudication by representation.” Amchem Products, Inc. v. Windsor,

521 U.S. 591, 623, 117 S. Ct. 2231, 2249, 138 L. Ed. 2d 689 (1997). In determining whether a class

action is the superior method for adjudication, a court looks at four factors: (1) class members’

interest in individually controlling their separate actions; (2) the extent and nature of existing

litigation by class members concerning the same claims; (3) the desirability or undesirability of

concentrating the litigation of the claims in the particular forum; and (4) the likely difficulties in

managing the class definition. FED. R. CIV. P. 23(b)(3).

In Thompson v. Bayer Corp., the Honorable James M. Moody denied certification of a

nationwide class plagued with conflict-of-law issues similar to those here. The court first conducted

an extensive analysis of the material conflicts between the unjust enrichment law of Arkansas and

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other states. Thompson, 2009 WL 362982, at *4-6. The court then held that the plaintiff’s

nationwide class claims did not meet the predominance or superiority requirements in Rule 23(b)(3):

As explained in the discussion of conflicts of law, plaintiffs will be required to

present different evidence to prove a prima facie case of unjust enrichment depending

on their state of citizenship. Evidence regarding the Defendant’s conduct, the direct

or indirect benefit to the Defendant, and adequate remedies at law which may be

available to the plaintiff cannot be presented on a systematic, class-wide basis.

* * *

Although Plaintiff insists that the management of this class action is possible, the

difficulties in protecting the “integrity of the law of each state” overwhelms any

judicial economy which might be attained.

Id. at *7. Thus, based on the outcome-determinative conflicts in various states’ laws, the court found

that the superiority and predominance requirements of Rule 23(b)(3) were not satisfied. Id. at *8

(citing In re Am. Medical Systems, Inc., 75 F.3d 1069, 1085 (6th Cir. 1996) (“If more than a few of

the laws of the fifty states differ, the district judge would face an impossible task of instructing a jury

on the relevant law, yet another reason why class certification would not be the appropriate course

of action.”)). See also Castano v. Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996) (“In a multistate class action, variations in state law may swamp any common issues and defeat

predominance.”); In re Conagra, 251 F.R.D. at 697 (“This morass is useful to establish not only the

lack of uniformity of unjust enrichment claims across the country, but also the inferiority of classwide resolution due to discerning the many differing legal standards.”); Siegel v. Shell Oil. Co., 256

F.R.D. 580, 586 (N.D. Ill. 2008) (“Because Plaintiffs allege that the false representations were the

‘price at the pumps,’ which is where consumers received and relied upon these representations, . .

. the place of each class member’s gas purchase govern[s] that class member’s claim. Thus, applying

Illinois’ choice-of-law rules leads to the application of each state’s consumer protection laws. As

a result, Plaintiffs have failed in their burden of establishing the requirements of commonality,

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22

superiority, and predominance . . . .”); Clay, 188 F.R.D. at 501 (“claim of unjust enrichment is

packed with individual issues and would be unmanageable”).

As with its conflict of law analysis, this Court is persuaded by, and thus adopts, Thompson’s

reasoning on certification. Here, there are outcome-determinative conflicts in states’ consumer

protection statutes and unjust enrichment laws. The nature of Tyler’s claims would require this

Court to apply the laws of twenty-five states to the claims of the early disconnect penalty class.

Applying twenty-five states’ laws to Tyler’s class, even if divided into twenty-five different subclasses, would present the Court with an unmanageable situation at trial. See In re Prempro, 230

F.R.D. at 568 (“The difficulties likely to be encountered in the management of a class action are

strongly considered when analyzing superiority. . . . It is well settled that the application of multiple

state laws can render a case unmanageable.”) (citing Andrews v. Am. Tel. & Tel. Co., 95 F.3d 1014,

1024-25 (11th Cir. 1996); Castano, 84 F.3d at 741-44) (internal quotes omitted). As in Thompson

and the cases cited along with it, the outcome-determinative conflicts between states’ unjust

enrichment and consumer protection laws in this case are fatal to the satisfaction of Rule 23(b)(3)’s

commonality and predominance requirements. The Court thus declines, in its discretion, to certify

the early disconnect penalty payor class because the proposed class fails to meet the requirements

of Rule 23(b)(3).

2. Rule 23(b)(2)

Tyler also moves for certification of an early disconnect penalty current subscriber class

under Rule 23(b)(2). Rule 23(b)(2) allows for class actions where the party opposing the class has

acted or refused to act on grounds generally applicable to the class, thereby making appropriate final

injunctive relief or corresponding declaratory relief with respect to the class as a whole. FED.R.CIV.

Case 4:07-cv-00019-JLH Document 173 Filed 02/23/10 Page 22 of 24
11 In Tyler’s 62-page brief in support of her motion to certify the early disconnect penalty

classes, she devoted only one page to arguing for certification of the current subscriber class

under Rule 23(b)(2).

23

P. 23(b)(2). Tyler’s motion for certification seeks an injunction to prevent Alltel from exacting its

early disconnect penalty on any current subscribers.

Tyler’s proposed Rule 23(b)(2) class was only a minor focus of the parties’ significant

briefing on the issues relating to certification of the early disconnect penalty classes.11 Although

Rule 23(b)(3)’s commonality and predominance requirements are not present in Rule 23(b)(2),

“courts have held that class claims under 23(b)(2) must be cohesive.” In re Prempro, 230 F.R.D.

at 569 (citing Barnes v. Am. Tobacco Co., 161 F.3d 127, 142 (3rd Cir. 1998) (“[T]he cohesiveness

requirement enunciated by [Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S. Ct. 2231, 138

L. Ed. 2d 689 (1997)] extends beyond Rule 23(b)(3) class actions. Indeed, a (b)(2) class may require

more cohesiveness than a (b)(3) class.”); In re Baycol, 218 F.R.D. at 211; Thompson v. Am. Tobacco

Co., Inc., 189 F.R.D. 544, 557 (D. Minn. 1999)). “A class cannot be cohesive if the states’ laws

governing the class are notably different.” Id.

The current subscriber Rule 23(b)(2) class fails for all the same reasons as Tyler’s proposed

Rule 23(b)(3) classes. There are outcome-determinative conflicts between the laws of Arkansas and

the other twenty-four states, each of whose laws would apply to the customers in those respective

states. The myriad of individual legal issues in Tyler’s class claims is fatal to any possible cohesion

in a Rule 23(b)(2) early disconnect penalty current subscriber class. See In re Prempro, 230 F.R.D.

at 569 (denying certification because the proposed Rule 23(b)(2) class would require application of

twenty-four states’ medical monitoring laws, which contained outcome-determinative conflicts).

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CONCLUSION

For the foregoing reasons, Tyler’s renewed motion for certification of the early disconnect

penalty classes is DENIED. Document #109. Alltel’s motion to strike Tyler’s class allegations, and

Tyler’s motion to strike the expert testimony of Prof. Jerry Hausman, are DENIED as moot.

Documents #82 and #141. Tyler has also filed a motion for leave to file a second amended

complaint to remove the carve-out provision for Arkansas residents. That motion was filed after

the Saline County Circuit Court denied certification of the nearly identical early disconnect penalty

state court action, which the Arkansas Supreme Court recently reversed and remanded. Tyler has

moved for class certification on the presumption that this Court would grant leave to amend, but

whether the carve-out provision for Arkansas residents is included or removed from Tyler’s proposed

class definitions does not affect the Court’s reasoning in denying class certification. Therefore,

Tyler’s motion for leave to amend is also DENIED as moot. Document #76.

IT IS SO ORDERED this 23rd day of February, 2010.

 

J. LEON HOLMES

UNITED STATES DISTRICT JUDGE

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