Opinion ID: 796307
Heading Depth: 3
Heading Rank: 1

Heading: Degree of uniformity among misrepresentations: common course of conduct standard

Text: 30 The required degree of uniformity among misrepresentations in a class action for fraud is a question of law which we review de novo. See Torres-Lopez v. May, 111 F.3d 633, 638 (9th Cir.1997). Lehman argues that for the fraud claim to have been properly tried on a class basis, the Borrowers were required to demonstrate that First Alliance's alleged misrepresentations were conveyed to borrowers in a uniform manner and that the uniform misrepresentations came directly from the written, standardized sales pitch. According to Lehman, the Borrowers' failure to make these showings prior to class certification or during trial made class treatment inappropriate in the first place and the class-wide verdict erroneous as a matter of law. Lehman essentially asks us to hold that in order for the jury finding to stand, the misrepresentation at the heart of the class-wide fraud finding must have been a direct quote from the Track, repeated in a verbatim fashion to each member of the class. This we decline to do, for such a degree of commonality is not required. 31 The familiar federal rule for class certification requires that there are questions of law or fact common to the class. Fed.R.Civ.P. 23(a)(2). When the modern class action rule was adopted, it was made clear that common did not require complete congruence. The Advisory Committee on Rule 23 considered the function of the class action mechanism in the context of a fraud case and explained that while a case may be unsuited for class treatment if there was material variation in the representations made or in the kinds or degrees of reliance by the persons to whom they were addressed, a fraud perpetrated on numerous persons by the use of similar misrepresentations may be an appealing situation for a class action . . . . Fed.R.Civ.P. 23, Advisory Committee Notes to 1966 Amendments, Subdivision (b)(3); see also 39 F.R.D. 69, 103 (1966). While some other courts have adopted somewhat different standards in identifying the degree of factual commonality required in the misrepresentations to class members in order to hold a defendant liable for class-wide fraud, 3 this court has followed an approach that favors class treatment of fraud claims stemming from a common course of conduct. See Blackie v. Barrack, 524 F.2d 891, 902 (9th Cir. 1975) (Confronted with a class of purchasers allegedly defrauded over a period of time by similar misrepresentations, courts have taken the common sense approach that the class is united by a common interest in determining whether a defendant's course of conduct is in its broad outlines actionable, which is not defeated by slight differences in class members' positions); see also Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 914 (9th Cir. 1964). 32 Class treatment has been permitted in fraud cases where, as in this case, a standardized sales pitch is employed. In In re American Continental Corp./Lincoln Savings & Loan Securities Litigation, 140 F.R.D. 425 (D.Ariz.1992), the court correctly rejected a talismanic rule that a class action may not be maintained where a fraud is consummated principally through oral misrepresentations, unless those representations are all but identical, observing that such a strict standard overlooks the design and intent of Rule 23. Id. at 430. Lincoln Savings involved a scheme that included, among other things, the sale of debentures to individual investors who relied on oral representations of bond salespersons who in turn had received from defendants fraudulent information about the value of the bonds. The Lincoln Savings court focused on the evidence of a centrally orchestrated strategy in finding that the center of gravity of the fraud transcends the specific details of oral communications. Id. at 430-31. As the court explained: 33 [T]he gravamen of the alleged fraud is not limited to the specific misrepresentations made to bond purchasers.... The exact wording of the oral misrepresentations, therefore, is not the predominant issue. It is the underlying scheme which demands attention. Each plaintiff is similarly situated with respect to it, and it would be folly to force each bond purchaser to prove the nucleus of the alleged fraud again and again. 34 Id. at 431; see also Schaefer v. Overland Express Family of Funds, 169 F.R.D. 124, 129 (S.D.Cal.1996) (citing Lincoln Savings for the proposition that representations made to brokers or salesmen which are intended to be communicated to investors are sufficient to warrant class standing, even where the actual representations to individuals varied). The Borrowers' allegations of First Alliance's fraud fit comfortably within the standard for class treatment. 35