Opinion ID: 3065438
Heading Depth: 2
Heading Rank: 2

Heading: The District Court Erred as a Matter of Law When

Text: It Found that Hawaii’s Consumer Protection Law Required Individualized Showings of Reliance The Hawaii Supreme Court has described the state’s consumer protection laws as having been “constructed in broad language in order to constitute a flexible tool to stop and prevent fraudulent, unfair or deceptive business practices for the protection of both consumers and honest businessmen.” Ai v. Frank Huff Agency, Ltd., 607 P.2d 1304, 1311 (Haw. 1980), overruled on other grounds by Robert’s Haw. Sch. Bus, Inc. v. Laupahoehoe Transp. Co., Inc., 982 P.2d 853 (Haw. 1999). Although “deceptive” practices violate Hawaii’s Hawaii Revised Statute § 480-2, chapter 480 provides no definition of “deceptive.” Courbat, 141 P.3d at 434. Section 480-2 provides, in pertinent part, as follows: YOKOYAMA v. MIDLAND NATIONAL LIFE 2137 (a) Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are unlawful. (b) In construing this section, the courts and the office of consumer protection shall give due consideration to the rules, regulations, and decisions of the Federal Trade Commission and the federal courts interpreting section 5(a)(1) of the Federal Trade Commission Act (15 U.S.C. 45(a)(1)), as from time to time amended. Haw. Rev. Stat. § 480-2. [4] Hawaii courts have interpreted the word “deceptive” to include those acts that mislead “consumers acting reasonably under the circumstances.” Courbat, 141 P.3d at 435. Hawaii courts have held that deceptive practices are those “tend[ing] to mislead or deceive.” Bronster, 919 P.2d at 312. A deceptive act or practice is “(1) a representation, omission, or practice[ ] that (2) is likely to mislead consumers acting reasonably under the circumstances [where] (3) [ ] the representation, omission, or practice is material.” Courbat, 141 P.3d at 435 (alterations in original) (citation omitted). The representation, omission, or practice is material if it is likely to affect a consumer’s choice. Id. Whether information is likely to affect a consumer’s choice is an objective inquiry, “turning on whether the act or omission is ‘likely to mislead consumers’ as to information ‘important to consumers’ in making a decision regarding the product or service.” Id. (internal citations and footnote omitted). Therefore, Hawaii’s consumer protection laws look to a reasonable consumer, not the particular consumer. [5] Hawaii’s consumer protection laws expressly consider class actions to be appropriate enforcement mechanisms. Haw. Rev. Stat. § 480-13(c) (“The remedies provided in subsections (a) and (b) shall be applied in class action and de 2138 YOKOYAMA v. MIDLAND NATIONAL LIFE facto class action lawsuits or proceedings, including actions brought on behalf of direct or indirect purchasers . . . .”). Hawaii’s courts recognize that its consumer protection laws can be enforced through class actions. See Fuller v. Pac. Med. Collections, Inc., 891 P.2d 300, 309 (Haw. App. 1995). Retaining the class action feature likely helps bolster the “flexibility” of the consumer protection laws. See Ai, 607 P.2d at 1311. III. The District Court’s Denial of Class Certification Was a Per Se Abuse of Discretion Because It Was Premised on Legal Error The district court refused to certify a class in this case because it determined that Hawaii’s consumer protection laws require individualized reliance showings. Believing that the plaintiffs’ claims would “require inspection of whether the class members individually relied on Midland’s misstatements,” the district court concluded that class issues do not predominate over issues affecting individual members. [6] The district court’s premise was contrary to the Hawaii Supreme Court’s interpretation of Hawaii state law, because the Hawaii Supreme Court has made it clear that reliance is judged by an “objective ‘reasonable person’ standard.” Cour- bat, 141 P.3d at 436. Hawaii’s Supreme Court has said as much: “[A]ctual deception need not be shown; the capacity to deceive is sufficient.” Bronster, 919 P.2d at 313. Because Hawaii uses an objective test to effectuate its remedial consumer protection statute, the district court erred in holding that individual reliance issues make this case inappropriate for class certification. [7] These plaintiffs base their lawsuit only on what Midland did not disclose to them in its forms. The jury will not have to determine whether each plaintiff subjectively relied on the omissions, but will instead have to determine only YOKOYAMA v. MIDLAND NATIONAL LIFE 2139 whether those omissions were likely to deceive a reasonable person. This does not involve an individualized inquiry. [8] The district court also determined that the plaintiffs’ claims “involve separate questions of fact as to what information the independent brokers selling the [annuities] conveyed.” The plaintiffs’ allegations, however, are that the deceptive acts or practices are omissions or misstatements in Midland’s own brochures. More specifically, their Fourth Amended Complaint alleges that the deception was perpetrated by Midland through its “fail[ure] to disclose to Plaintiffs and Class Members material information concerning the benefits/detriments from, and suitability and impact of” the annuities. The plaintiffs have thus crafted their lawsuit so as to avoid individual variance among the class members. Plaintiffs’ case will not require the fact-finder to parse what oral representations each broker made to each plaintiff. Instead, the fact-finder will focus on the standardized written materials given to all plaintiffs and determine whether those materials are “likely to mislead consumers acting reasonably under the circumstances.” Courbat, 141 P.3d at 435. Perhaps in part because the district court interpreted Hawaii law to require subjective reliance, it concluded that the damages calculation involved highly individualized and factspecific determinations. The District Court explained that the amount of damage sustained by a single class member would depend on factors such as the finan- cial circumstances and objectives of each class member; their ages; the IAP selected; any changes in the fixed interest rate for that particular IAP; the performance of the selected index; any changes in the index margin for that particular IAP; any cap on the indexed interest; the length of the surrender periods; whether the individual had undertaken or wanted to undertake an early withdrawal of funds; any benefit the individual policy holder derived from the form of 2140 YOKOYAMA v. MIDLAND NATIONAL LIFE the annuity itself, including the tax-deferral of credited interest; and the actual rate of return on the IAP. [9] Damage calculations will doubtless have to be made under Hawaii’s consumer protection laws. See Flores v. Rawlings Co., LLC, 177 P.3d 341, 355 (Haw. 2008); Balthazar v. Verizon Haw. Inc., 123 P.3d 194 (Haw. 2005). In this circuit, however, damage calculations alone cannot defeat certification. We have said that “[t]he amount of damages is invariably an individual question and does not defeat class action treatment.” Blackie, 524 F.2d at 905. Thus, because there are no individualized issues sufficient to render class certification inappropriate under Rule 23, class issues predominate. The same erroneous interpretation of Hawaii’s consumer protection law undermines the district court’s determination that a class action was not a “superior” means to adjudicate the case. The principal reason that the district court found that a class action was not “superior” was the many “individual determinations that must be made,” a rationale premised on the district court’s misinterpretation of Hawaii law and this circuit’s precedent regarding the significance of individualized damages calculations in the context of class certification. While the district court also reasoned that there was an incentive to pursue individual claims because the average purchase price exceeded $50,000, the parties do not dispute that average actual damages would be only about 20-30 percent of the purchase price. Lastly, while the court said that individual claims against brokers could not be adjudicated within the class action framework, the existence of individual claims against other parties, such as brokers, does not necessarily defeat the availability of a class action against the company under a statute aimed at protecting reasonable consumers from deceptive business practices. See Courbat, 141 P.3d at 434-35; Ai, 607 P.2d at 1311. Therefore, since it is clear that the district court’s overriding but erroneous concern was that a need for individualized determinations of both reliance and YOKOYAMA v. MIDLAND NATIONAL LIFE 2141 damages defeated class treatment, we also reverse the district court’s superiority determination.