### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE NOVEMBER 8,

2001 Session JEFFREY CROUCH, ET AL 

### . v. BRIDGE TERMINAL TRANSPORT, INC.

Direct Appeal from the Chancery Court for Davidson County No. 00-1171-I; The Honorable Irvin H. Kilcrease, Jr., Chancellor

No. M2001-00789-COA-R3-CV - Filed April 30, 2002

This appeal involves a trial co urt’s refusal to g

rant class action

status to plaintiffs ’ claims for breach of contract and promissory fraud. Plaintiffs filed suit against defend ant a lleging that identical contracts between propose

d class memb ers and defendant were breached and that defendant’s conduct amounted to

promissory

fraud. The trial court held that plaintiffs failed to show that issues of law and fact common to the class predominated over individual questions and refused to certify the class. Plaintiffs w

ere granted th

is in terloc utory appeal to review the trial court’s decision on class certification. For the following reasons, we affirm the decision of the trial court.

Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Affirmed
A LAN E. H IGHERS , J., delivered the opinion of the court, in which W. F RANK C RAWFORD , P.J., W.S., and D AVID R. F ARMER , J., joined.
Charles J. Williams

& John B. Carlson, Na

shville, TN, for Ap

pellants Michael Richards, Memphis, TN, and John S. Hicks, Nashville, TN, for Appellee
OPINION I. Facts and Procedural History Jeffrey Crouch, James Gifford, and Shelli e Lemons (“Plaintiffs”) independently own and operate tractor trailers. Plai ntiffs signed identical contracts with Br i dge Terminal Transport, Inc. (“Defendant”) wherein Plaintiffs agreed to provide trucking services for Defendant. Each contract containedan identical “Schedule B” that outlined various rates of compensation for Plai ntiffs’ services. Approximately one hundred other individuals who own and operate tractor trailers signed identical contracts

with Defendant. T

hese contracts a

lso contained the s

ame Schedule

B outlining compensation.-2-

As a result of Defen dant’s performance under the contracts, Plaintiffs filed a class action lawsuit against Defendant on Apr

il 13, 2000. Plaintiffs brought the lawsuit pursuant to Rule 23 of the Tennessee Rules of Civil Procedure on behalf of the mselves and the other truckers who had signed identical contra

cts with Defenda

nt. Plaintiffs’ complaint sought compensatory and punitive damages for breach

of contract and promissory fraud. Plaintiffs alleged that Defe ndant breached

the identical contracts by

re fusing to pay the truckers according to Schedule B and refusing to return escrow funds as required under the contracts’ terms. As a bas is for promissory fraud, Plaintiffs alleged that they ha

d reasonably

relied on Defen

dant’s represe

ntations in the cont

r acts, but t

hat Defendant never had the intention of paying Plaintiffs as ag reed.
Defendant

filed a motion to dism

iss the class action claims. In its motion, Defendant argued that common i ssues of fact and law did not predominate. With regard to promissory fraud, Defendant

asserted that individualized hearings would be needed to establish reliance. With regard to the breach o f contract cau se of action, Defendant pointed to a provision in the contract which stated:
Notwithstan ding any provision of this contract to the contrary, this contra ct shall be terminated upon th

e happening of a

ny of the fol

lowing events: (1) For any br

each of the cont

ract, unless the p

arties m anifest an intenti o n by written agreement or otherwise not to terminate this contract upon such breach.
Based on this provision, De

fendant argue

d that individual he

arings would hav

e to be conducted for eachclass member in or

der to determine whether a breach occurred and if so, whether the contract was terminated by the parties’ manifested intentions. Defendant fu rther arg ued that if the parties continued employment under the contract after a breach occurred, the element of reliance, needed for the promissory fraud claim, would be negated.
In respo nse to Defendant’s motion, Plaintiffs submitted affidavits of the three named Plaintiffs and eight proposed class members. Plaintiffs argued that the se affidavits established that the individual contracts were identical. Further, the affidavits stated that Defendant flatly refused to ho nor the contracts for each of the proposed class members. Based on the affidavits, Plaintiffs argue that individual hearings would not be required for either claim. Spe cif ica lly, Plaintiffs argued that with regard to the breach of contract claim, no individual hearings would be necessary be cause th e contracts were terminated on the dates the individual trucke rs stopped performing services for Defendant. Plaintiffs premised their argument on th e assertion that even with the p rovision in the cont

ract relied upon

by Defenda

nt, the manifest intentions of the Plaintiffs to term inat e the contract could easily be determined by simply looking at the date each proposed class member quit providing services to Defendant. This date, Plaintiffs argued, could be easily confirmed by Defendant’s re

cords without a he

aring. In a

ddition, with

regard to the promissory

fraud claim, Plain

tiffs recited sta

tements in the affidavits stating that all those who-3-

enter a contract

necessarily rely on the e

xpectation that the contrac t will be honored. B ased on these statements, Plaintiffs argued that no individual hearings on reliance would be needed.
The court granted

Defendant’s moti

on and refused to

certify the

class. The court reasoned that individual ques tions of fac t predominated ove r questions of law o

r fact common to the

class. In its order dismissing Plaintiffs’ class action claims, the court held that individual hea

rings would be needed to determine“wheth er a class member waived his rights by continuing to work for [Defendant] after

[Defendant] had breached the contract and whether class member relied upon the alleged misrepresentation by

[Defendant].” Stat

ing that it would be

economically

unfeasible

for the proposedclass members to proceed individually, Plaintiffs filed this interlocutory appeal to review the trial court’s refusal to certify the class.
II. Issue
Whether the trial erred i

n refusing to ce

rtify Plainti

ffs’ propose

d class and finding that individual hearings would be required in order for the individual class members to prove breach of contract and promissory fraud.

III. Standard of Review Class action status for a claim is not given as a right under Tennessee law. First Am. Nat’l Bank of Nashville v. Hunter , 581 S.W.2d 655, 659 (Tenn. Ct. App. 1978). Instead, class action status is a procedural privilege that maybe granted in the trial court’s sound discretion. Id. Thus,
we will reverse a tr

ial court’s decis

ion to deny certification of a class only when the party seeking class certification ha

s demo nstrated an abuse of the trial court’s discretion. Hamilton v. Gibson County Util. Di

st. , 845 S.W.2d 218, 225 (Tenn. Ct. App. 1992).
In determining whether an abuse of discretion has occurred, we must keep in mind that the party seeking class certification bears the burden of showing that the prerequisites of Rule 23 of the Tennessee Rules of Civil Procedure have been satisfied. Id. Further, appel latecourts must not me re ly substitute their judgment for that of the trial court when determining whether an abuse of discretion has occurred. White v. Vander bilt Univ. , 21 S.W.3d 215, 223 (Tenn. Ct. App. 1999) Instead, appellate revie

w must seek to deter

mine whether the l

ower court's de

cision has a basis i

n law or fact and is therefore notarbitrary, illogical, or unconscionable. State v. Brown & Williamson Tobacco Corp. , 18 S .W.3d 186, 191 (Tenn.2000). Where a trial court has improperly construed or applied the applicable legal principles, appellate courts may prop erl y reverse the trial court’s decision. White , 21 S.W.3d at 223.

IV. Law and Analysis-4-

Rule 23 of the Tennessee Rules of Civil Procedure governs the availability of class action status in Tennessee. For

class action treatment

to be proper, Rule 23.01 requires the following four elementsto be present: a c lass so numerous as

to make joinder impractical, questions of law or fact common to the class, typicality of claims and defense s among the class members, and representative parties who can fairly and adequately represent the interests of t he ent ire class. T ENN
. R. C IV
. P. 23.01.
In addition to the requirements of Rule 23.01, a proposed class must also meet one of three requirements

listed in Rule 23.02 . Here, Plai ntiffs bro ught this ac tion relying o n Rule 23.02(3), which states:
The court finds that the question of law or fact common to the members of the class predominate

over any question

s affecting onl

y individual m

embers, and that a class action is superior to other

available methods for thefair and efficient adjudication of the controve rsy. The matters pertinent to the findings include: (a) the interest of members of

the cl ass in individually controlling the prosecution or defense of separate actions; (b) the extent and nature of any litigation concerning the controversy

already com

m enced by or against members of the class; (c) the desirability

or undesirability of concentrating the litigation of the claim s in the particular forum; (d) the difficulties likely to be encountered in the management of a class action.
As specified by the parties, this appeal essentially involves the issue of whether the questions of law or fact common to the members of the class “predo

minate over any

questions affec

ting only individual members” as contemplated in Rule 23.02(3). Plaintiffs’ complaint states the following as common issues of fact and law: a) w hether

Defendant’s uniform course of conduct in calculating wha t wa s owedto and paying drivers . . . violated the clear and unambiguous terms of that contract; b) whet herD efendant’s uniform course of conduct in calculating what was owedto and paying dr

ivers . . . violated

defendant’s obli

gation of good f

aith and fair dealing in regard to its construction of and performance under that contract; c) whether

Defe nda nt i s gui lty o f pr omi sso ry fra ud b y i n ducing its driver s to enter into a contr

ac t . . . with the intenti

on of not comply

ing with the terms and provisions of that contract; and d) whether

Defendan t is liable for punitive damages predi

cated upon its fraudulent conduct.
Acco rdi ngly, we must determine whether the trial court abused its discretion in hol

ding that these common issues of law and fact did not predominate over individual questions of law and fact. The-5-

determination of this issue nece ssarily dep

ends on whethe r the class members will require individualized hearings to prove the elements for each cause of action.
With regard to the a

lleged breac

h of contract,

as st ated above, the trial court held that individual hearings would be necessary to determine “whether a class member waived his rights by continuing to work for [Defendant] after [Defendant] had breached the contract.” I

n opposition to the court’s rul ing, Plaintiffs bring o ur attention to

17A A M
. J UR
. 2 D , Contracts § 731 (1991), which states:
Where there has been a mate rial breach whic

h does not indicate

an intention to re pudiate the remainder of the contract, the injured party has an ele ction of continuing performance, or of ceasing to perform, or of repudiating the contract. Any act by the injured party indicating an intent to continue will operate as a conclusive election, not depriving him o f the right of ac

tion for th

e breach wh ich has already taken p lace , but depriving him of any excuse for ceasing performa nce on his own part. Id. at p. 741-42. Plaintiffs arguethat this provision illustrates that the class members could not have waivedtheir right

to sue Defendant for b

reach of contra

ct. Plaintiffs cont

end that this provis

ion only shows that by

continuing perf

ormance, the cla

ss members merely waived their right to repudiate the contract and cease their performance.
Under Tennessee law, however, a party may waive his or

her known rights under a contract by either express declarations or by acts manifesting an intent not to claim the rights. Tenn. Asphalt Co. v. Purcell Enter. , 631 S.W.2d 439, 444 (Tenn. Ct. App. 1 982) (c iting Dallas Glass, etc. v. Bituminous F. & M. Ins. , 544 S.W .2d 351 (Tenn.1976)). Whe ther by dec

laration or by

acts, however, the waiver must be intentional. Hill v. Goodwin , 722 S.W.2d 668, 671 (Tenn. Ct. App. 1986) (citing Baird v. Fidelity-Phenix Fire Ins. Co. , 162 S.W.2d 384 (Tenn. 1942)). Although the American Jurisprudence section relied upon by Plaintiffs does not presume a waiver in the event of continued performance a

fter a material

breach, Tenne

ssee law nevert

heless recogn

izes t hat righ ts under a contract may be waived under certain circumstances. While we make no determination of whether Plaintiffs indeed waived their rights, our inquir

y into the law

reveals that the

trial court did have a legal basis in ruling t hat indivi dual hearin gs could be required for the proposed class members withregard to the breach of contract claim. Accordingly, we hold that the trial court did

not abuse its discretion in this respect.
With regard to Plaint

iff’s claim for f

raud, as this

Court explained in Stacks v. Saunders , 812 S.W.2d 587 (Tenn. Ct. A pp. 1990), an acti

on for fraud con

tains four basic e

lements: (1) an int entional misrepresentation with regard to a material fact, Keith v. Murfreesboro Livestock Market, Inc. , 780 S.W.2 d 751 (Tenn.Ct.App.1989); (2) knowledge of the represen tation fals ity- -that the representation was made "kno win gly" or "without belief in its truth," or "recklessly" without reg ardto its truth or falsity, Tartera

v. Palumbo , 224 Tenn. 262, 266-67, 453 S.W.2d 780, 782 (1970);-6-

(3) that the plaintiff reasonably relied on the misrepresentation and suffere d damage, Holt v. American P rogressive Life Ins. Co. , 731 S.W.2d 923, 927 (Tenn. C t.App.1987); Haynes v. Cumberland Builders, Inc. , 546 S.W.2d 228, 232 (Tenn.Ct.App.1976); and (4) that the misrepresentation relates to an existing or past fact, Haynes , 546 S.W.2d at 232 . . . .
Stacks , 812 S.W.2d at 592. The essential requirements of any action for fraud will always include detrimental reliance on a false premise. Farley v. Clayton , 928 S.W.2d 931, 933 (Te nn. Ct. App.1996) (c iting Shwab v. Walters , 251 S.W. 42 (1922)) ; Tartera v. Palumbo , 453 S.W.2d 78 0 (Tenn. 1970); Williams v. Van Hers h , 578 S.W.2d 373 (Tenn. Ct. App.1978); Dozier v. Hawthorne Development

Co. , 262 S.W.2d 705 (Tenn. Ct. App. 1953). When the claim is for promissory fraud, “the misrepresentation must embody a promise of future action without the present intention to carry out the promise.” Stacks , 812 S.W.2d at 592.
Tennessee appellat e court s have repeatedly held that the elements of fraud can ne ver be presumed. Hiller v. Hailey , 915 S.W.2d 800, 803 (Tenn. Ct. App.) (citations omitted). Instead, because “the presumption is in favor of the fa irness of the transaction and the innocence of the person accused,” each element must be affirmatively proven by the party alleging fraud. Williams v. Spinks , 7 Tenn.App. 488, 494 (1928). Accordingly, each proposed c lass member must prove each element individually for his or her respective claim.
The flaw in

Plaintiffs’ reasoning here deals with the element of reliance. As indicated above, eachproposedclass member would be required to affirmatively prove that they detrimentally relied on the representations of Defendant and suffered damages as a r

esult. Plaintiff de

als with this issue by merely asserting that any

one who enters a contract necessarily relies on the contrac t being carried outaccording to its terms. While wegenerally agree with this statement, as applied to the facts of this case, such a declaration of reliance is insufficient to confer class action

status to Plaintiffs w

ith regard to this cause of action.
As poi nte d ou t by Defen dant, many of the proposed class members chose to continue working under the contract after the alleged breacheshad occurred. G iven the facts, Pla

intiffs’ basic assertion regarding reliance becomes strained. Individual hearings would be required to determine whether the class members continued relying on their contract’s terms if they knew that the contract had previously been dishonored. This situation was obviou sly recognized by the trial court. Accordingly, because of the necessity for proof of reliance and

the individual hea

rings that would be necessary

, we hold that the c

ourt did not abuse it

s discretion in ref

using to certify

the class.-7- V. Conclusion
Based on the foregoing conclusions, we hereby affirm the decision of the circuit court. Cos ts on appeal are asse

ssed against Plaint

i ffs Jeffrey

Crouch, James Gifford, and Shellie Lemons and their sureties for which execution may issue if necessary.

___________________________________ ALAN E. HIGHERS, JUDGE