Opinion ID: 2732311
Heading Depth: 3
Heading Rank: 1

Heading: State Law Consumer Fraud Claims

Text: As noted above, the District Court sought to determine which state law would govern the state consumer fraud claims for the proposed nationwide Post-EOB Billing Class and Anthem BCBS FEHB Program Class. Appellants argue that the District Court should not have engaged in this choice of law analysis at the class certification stage, citing Sullivan v. DB Investments, Inc., 667 F.3d 273 (3d Cir. 2011) (en banc). There, we noted that “many courts find it inappropriate to decide choice of law issues incident to a motion for class 8 certification.” Id. at 309 (citation and quotation marks omitted). However, Sullivan concerned settlement classes, which do not pose the types of management problems that can arise in a nationwide class action trial. We specifically stated in Sullivan: Because we are presented with a settlement class certification, we are not as concerned with formulating some prediction as to how [variances in state law] would play out at trial, for the proposal is that there be no trial. As such, we simply need not inquire whether the varying state treatments of indirect purchaser damage claims at issue would present the type of ‘insuperable obstacles’ or ‘intractable management problems’ pertinent to certification of a litigation class. Id. at 303-04. We recognized that “there may still be circumstances . . . where ‘[i]n a multi-state class action, variations in state law may swamp any common issues and defeat predominance.’” Id. at 304 n.28 (citation omitted). The nationwide classes proposed by Appellants were for purposes of trial, not settlement. Under such facts, it was reasonable for the District Court to inquire at the certification 9 stage as to whether the classes posed “intractable management problems” for trial. See id. at 304. Indeed, we have found error where a District Court failed to do so. See In re LifeUSA Holding Inc., 242 F.3d 136, 147 (3d Cir. 2001) (finding error where the “District Court failed to consider how individualized choice of law analysis of the forty-eight different jurisdictions would impact on Rule 23’s predominance requirement . . . .”); see also Georgine v. Amchem Prods., Inc., 83 F.3d 610, 627 (3d Cir. 1996) (“[B]ecause we must apply an individualized choice of law analysis to each plaintiff’s claims . . . the proliferation of disparate factual and legal issues is compounded exponentially.”) (internal citation omitted). Thus, it was not an abuse of discretion for the District Court to determine what law would govern the proposed state consumer fraud law claims.
Appellants next assert that the District Court erred in concluding that the laws of putative class members’ home states controlled the state law claims. In its analysis, the District Court applied the choice of law rules of the forum state, New Jersey, to determine the controlling law. New Jersey has adopted “the most significant relationship” test set out in the Restatement (Second) of Conflict of Laws. P.V. ex rel. T.V. v. Camp Jaycee, 962 A.2d 453, 459-60 (N.J. 2008). Under this test, courts first inquire whether an actual conflict exists between the laws of the potentially relevant states. Id. at 460. The parties do not dispute that an actual conflict exists between New Jersey consumer fraud law and the consumer protection laws of other states. With an actual conflict, courts must then determine, by reference to the 10 Restatement, which state has the most significant relationship to the case and parties. Id. at 461. The District Court found that there are two distinct provisions in the Restatement which could apply in this case. First, § 148(1) of the Restatement applies “[w]hen the plaintiff has suffered pecuniary harm on account of his reliance on the defendant’s false representations and when the plaintiff’s action in reliance took place in the state where the false representations were made and received . . . .” (emphasis added). When this provision is satisfied, the law of the state where the representations were both made and received controls. The District Court held that § 148(1) governed the case because Quest’s misrepresentations (demand for payment in bills) were both made and received in the putative class members’ home states. The Court apparently found that while certain of the misrepresentations were sent from Quest’s headquarters in New Jersey, they were nonetheless “made” when they were “read at their destination – the customer’s home state . . . .” (App. 28.) This reasoning was identical to that in the District Court’s denial of Appellants’ first motion for class certification, which was not appealed, Agostino v. Quest Diagnostics Inc., 256 F.R.D. 437, 462-63 (D.N.J. 2009) (“Agostino I”). This reasoning has since been rejected by our Court. In Maniscalco v. Brother Int’l (USA) Corp., 709 F.3d 202, 208 (3d Cir. 2013) we held that “[c]onstruing the location to which a representation is ‘directed’ to be the same in which one is ‘made’—as opposed to the location from which the representation emanated—would render meaningless the Restatement drafters’ careful distinction between ‘made’ and ‘received.’” We specifically cited Agostino I as an instance in 11 which such an incorrect reading had occurred. Id. Thus, both parties here agree that § 148(1) of the Restatement (Second) of Conflict of Laws does not apply. When the misrepresentations were not made and received in the same state, the proper choice of law analysis instead involves § 148(2) of the Restatement, which uses six factors to determine the state with the most significant relationship to the case. Those factors are as follows: (a) the place, or places, where the plaintiff acted in reliance upon the defendant's representations, (b) the place where the plaintiff received the representations, (c) the place where the defendant made the representations, (d) the domicil, residence, nationality, place of incorporation and place of business of the parties, (e) the place where a tangible thing which is the subject of the transaction between the parties was situated at the time, and (f) the place where the plaintiff is to render performance under a contract which he has been induced to enter by the false representations of the defendant. Restatement (Second) of Conflict of Laws § 148(2). While the District Court did not have the benefit of Maniscalco at the time of its ruling, it actually did consider the appropriate analysis under § 148(2) as an alternative holding, and maintained that these factors still weighed in favor of using the law of individual class members’ states. The Court held that the class members each paid money in their home states 12 in reliance on the Quest bill (factor a), received the bill in their own states (factor b), presumably obtained lab services in their home states (factor e), and Quest was expected to render performance in their home states (factor f). The Court held that factor (d), the residence of all parties, was neutral. Finally, the District Court found that factor (c), the place where the defendant made the representations, New Jersey, was not enough to overcome the remaining factors’ favoring the use of class members’ home state consumer fraud law. While we agree with Appellants that the District Court erred in weighing certain of the factors,3 its analysis generally comports with our reasoning in Maniscalco. In that case, a plaintiff sought to bring a class action pursuant to New Jersey law, but the district court held that the law of plaintiff’s residence, South Carolina, applied instead. We affirmed, finding that factors (a) and (b), where the plaintiff acted in reliance and where he received the representations, weighed “strongly in favor of applying South Carolina law.” 709 F.3d at 208. Factor (e), the location of a tangible thing, weighed in favor of South Carolina law, because the case concerned a defective printer purchased in that state. Factor (f) was inapplicable because there was no contract. We held that factor (d), the location of all parties, weighed slightly in favor 3 Specifically, factor (e) is irrelevant to the case as it only concerns a “tangible thing which is the subject of the transaction,” and there was no tangible thing at issue here, only lab testing services. Further, factor (f) is also inapplicable as it only concerns rendering “performance under a contract which he has been induced to enter,” and Appellants entered no contract. 13 of South Carolina law, given that “[t]he domicil, residence and place of business of the plaintiff are more important than are similar contacts on the part of the defendant.” Restatement (Second) of Conflict of Laws § 148 cmt. i. We went on to note the further commentary in the Restatement that “[i]f any two of the above-mentioned contacts, apart from the defendant’s domicil, state of incorporation or place of business, are located wholly in a single state, this will usually be the state of the applicable law with respect to most issues.” Maniscalco, 709 F.3d at 209 (quoting Restatement (Second) of Conflict of Laws § 148 cmt. j). Here, similar to Maniscalco, factors (a) and (b), where the plaintiff acted in reliance and where he received the representations, weigh in favor of applying the laws of putative class members’ home states. In addition, factor (d), the residence of all parties, also weighs in favor of class members’ home state law, given that the domicil of the plaintiff is regarded by the Restatement as more important than that of the defendant. See Restatement (Second) of Conflict of Laws § 148 cmt. i. Also similar to Maniscalco, only factor (c), where the representations were made, weighs in favor of applying New Jersey law. As we held in Maniscalco, “[n]othing else about the relationship between the parties, other than the fortuitous location of [the defendant’s] headquarters, took place in the state of New Jersey. [Plaintiff’s] home state, in which he received and relied on [the defendant’s] alleged fraud, has the ‘most significant relationship’ to his consumer fraud claim.” Maniscalco, 709 F.3d at 208-09. The same conclusion applies here. 14 Finally, in Maniscalco we noted that the § 148(2) factors are to be construed in light of the principles set forth in § 6 of the Restatement, which include “(1) the interests of interstate comity, (2) the interests of the parties, (3) the interests underlying the field of tort law, (4) the interests of judicial administration, and (5) the competing interests of the states.” Id. at 207. We found that, on balance, these factors also weighed in favor of plaintiff’s home state law. Id. at 209-10. Here, the principles in § 6 of the Restatement apply with equal force in favor of class members’ home state laws. In Maniscalco we concluded that under the Restatement, the law of South Carolina, as plaintiff’s home state, applied to the action. While there are some small differences between this case and Maniscalco, none are dispositive. That case controls our analysis here and confirms that the laws of class members’ home states apply to their state law claims for the Post-EOB Billing Class and Anthem BCBS FEHB Program Class.
Appellants next contend that even if each class member’s home state law controlled their claims, the District Court erred in finding such claims impractical for class treatment. Appellants urged that the state consumer fraud statutes should be grouped into two categories for the purposes of litigation, those which proscribe (1) “unfair or deceptive” conduct (similar to the Federal Trade Commission Act), and (2) those that prohibit false or misleading conduct. (Appellants’ Opening Br. at 32.) Appellants again rely on Sullivan where we endorsed the general procedure of grouping multiple state laws into a few categories for the 15 purposes of class litigation. There we stated that, “[w]e [have] emphasized our willingness to certify nationwide classes where differences in state law fell ‘into a limited number of predictable patterns,’ and any deviations ‘could be overcome at trial by grouping similar state laws together and applying them as a unit.’” 667 F.3d at 301. The District Court took note of the grouping proposal by Appellants and found it wanting. The Court noted that Appellants’ analysis consisted “solely” of citation to, and brief discussion of one district court case which followed such a procedure, and an exhibit setting forth the National Consumer Law Center’s 2009 analysis of various state consumer fraud statutes. (App. 37.) The District Court noted that “[n]o effort has been made to demonstrate how Plaintiffs’ claims of deception through overbilling could be proven under the statutes’ varying elements of reliance, state of mind, and causation, to name a few. In other words, Plaintiffs have proposed two groups, but have not demonstrated how this grouping would apply to the facts and issues presented by this case . . . .” (Id.) Plaintiffs also provided no indication as to how the jury could be charged in some coherent manner relative to the proposed grouping. The District Court concluded that plaintiffs simply had “not met [their] burden” of demonstrating that grouping was warranted or workable. (App. 38.) We agree with the District Court and conclude that while grouping, in general, may be a permissible approach to nationwide class action litigation, in this case Appellants did not provide enough information or analysis to justify the certification of the classes they proposed. For example, in In re Prudential, we noted that the grouping proposal there consisted of a “series of charts setting forth comprehensive 16 analyses of the various states’ laws potentially applicable to their common law claims.” 148 F.3d 283, 315 (3d Cir. 1998) (internal quotation marks omitted). Such in-depth treatment justified the District Court’s decision to group state laws in that case, but is lacking here. In addition, Court of Appeals decisions cited in Sullivan explicitly recognized that plaintiffs face a significant burden to demonstrate that grouping is a workable solution. See Klay v. Humana, Inc., 382 F.3d 1241, 1262 (11th Cir. 2004) (“The burden of showing uniformity or the existence of only a small number of applicable standards (that is, ‘groupability’) among the laws of the fifty states rests squarely with the plaintiffs.”) (abrogated on other grounds); Walsh v. Ford Motor Co., 807 F.2d 1000, 1017 (D.C. Cir. 1986) (“[T]o establish commonality of the applicable law, nationwide class action movants must creditably demonstrate, through an ‘extensive analysis’ of state law variances, ‘that class certification does not present insuperable obstacles.’”). We agree with the District Court that Appellants have failed to provide a sufficient, or virtually any, analysis describing how the grouped state laws might apply to the facts of this case. They assert only that the differences between the state laws within each group are “insignificant or non-existent.” (Appellants’ Opening Br. at 27.) As the District Court held, Appellants must do more than provide their own ipse dixit, citation to a similar case, and a generic assessment of state consumer fraud statutes, to justify grouping. Thus, it was not an abuse of discretion for the District Court to find that Appellants had not carried their burden to show that grouping was workable, and that, consequently, the variations in state laws precluded the proposed groups. We also find no abuse of discretion in the 17 Court’s final conclusion that class litigation involving dozens of state consumer fraud laws was not viable and that common facts and a common course of conduct did not predominate. We therefore affirm the denial of certification of the PostEOB Billing Class and the Anthem BCBS FEHB Class, as to the state law consumer fraud claims.