Opinion ID: 2353606
Heading Depth: 2
Heading Rank: 1

Heading: C.R.C.P. 23(b)(3)'s Predominance Requirement

Text: C.R.C.P. 23(b)(3) requires a trial court to find that common questions predominate over any questions affecting only individual members and that class resolution is superior to other available methods for the fair and efficient adjudication of the controversy. C.R.C.P. 23(b)(3)'s predominance inquiry focuses on whether the proof at trial will be predominantly common to the class or primarily individualized. Medina v. Conseco Annuity Assur. Co., 121 P.3d 345, 348 (Colo.App.2005). This is a fact-driven, pragmatic inquiry[,] id., that often turns on whether the plaintiff advances a theory by which to prove or disprove an element on a simultaneous, class-wide basis, since such proof obviates the need to examine each class member's individual position,' Benzing, 206 P.3d at 820 (quoting Lockwood Motors, Inc. v. Gen. Motors Corp., 162 F.R.D. 569, 580 (D.Minn.1995)). A trial court must rigorously analyze the evidence presented and determine to its satisfaction whether the plaintiff has satisfied each of the C.R.C.P. 23 requirements. Jackson, 262 P.3d at 884. A plaintiff asserting a private cause of action under the CCPA must establish five elements: (1) that the defendant engaged in an unfair or deceptive trade practice; (2) that the challenged practice occurred in the course of defendant's business, vocation, or occupation; (3) that it significantly impacts the public as actual or potential consumers of the defendant's goods, services, or property; (4) that the plaintiff suffered injury in fact to a legally protected interest; and (5) that the challenged practice caused the plaintiff's injury. Hall, 969 P.2d at 235. In this case, the central issue for purposes of class certification is whether Plaintiffs can establish the fourth and fifth CCPA elements of causation and injury on a class-wide basis.
Plaintiffs contend that they can establish the causation element of their CCPA claims on a class-wide basis without consideration of individual evidence. Specifically, Plaintiffs argue that causation logically can be inferred from Medved's deceptive sales documents and Plaintiffs' subsequent purchase of a vehicle. That is, it can be inferred that Medved's deceptive sales documents caused an injury given that every Class I member relied on these documents in paying for non-existent dealer-added products while every Class II member relied on these documents in paying for inadequately disclosed dealer-added products. Plaintiffs further argue that a class-wide inference of causation obviates the need to analyze each face-to-face sales transaction to determine whether an individual Plaintiff actually relied on Medved's deceptive sales document or otherwise did not know about the dealer-added products at the time of purchasing a vehicle. Reliance often provides a key causal link between a consumer's injury and a defendant's deceptive practice. In May Department Stores Co. v. Woodard, we held that a consumer was harmed by a defendant's violation of the CCPA if that consumer had been exposed to defendant's deceptive practice and had undertaken activities in reliance on that deceptive practice. 863 P.2d 967, 973-74 (Colo.1993). Similarly, in Crowe v. Tull, we held that the plaintiff could maintain a CCPA claim against a lawyer for misleading advertising. 126 P.3d 196 (Colo.2006). We explained that the plaintiff could demonstrate causation based on the theory that reliance on the [attorney's misleading] advertising was the first link in a chain that led to the plaintiff's injury. Id. at 210. Reliance may be inferred from circumstantial evidence common to a class. In BP America, plaintiff royalty owners alleged that BP America Production Company (BP) fraudulently concealed improper deductions from royalties owed them under their royalty agreements. Slip op. at 4. One crucial issue for the purposes of the C.R.C.P. 23(b)(3) predominance inquiry was whether plaintiffs had established a class-wide theory for proving the ignorance and reliance elements of their fraudulent concealment claims. Id. at 16. On this point, we held that ignorance and reliance could be inferred from circumstantial evidence common to a class, i.e. without direct evidence of reliance. Id. at 17. Of course, we explained, the defendant has the opportunity to rebut such class-wide inferences with direct evidence. Id. at 19. We thus made it clear that the trial court must rigorously analyze the evidence presented to determine whether a class-wide inference is appropriate given the facts and circumstances of the case. Id. Courts have certified consumer fraud class-actions where causation can be established with circumstantial evidence common to a class, i.e. without direct evidence of reliance by individual consumers. For example, in Negrete v. Allianz Life Insurance of North America, the court certified a class of consumers who purchased annuities issued by Allianz. 238 F.R.D. 482, 484 (C.D.Cal. 2006). The plaintiffs alleged that Allianz concealed the disadvantages of the annuities it sold, including undisclosed sales commissions and forfeiture and penalty provisions. Id. at 486. To establish a cause of action under the Racketeer Influenced and Corrupt Organizations Act (RICO), the plaintiffs had to demonstrate that Allianz's deceptive sales practices proximately caused them harm. Id. at 489. Proof of causation turned on whether the plaintiffs relied on Allianz's misleading statements regarding the annuities it sold. Id. at 490. The court held that the plaintiffs could establish reliance on a class-wide basis with the common sense inference that no rational class member would purchase the annuities in questions [sic] upon adequate disclosure of the facts.... Id. at 491. Because reliance could be inferred from evidence common to the class, the court concluded that common issues predominated over individual issues with respect to the plaintiffs' RICO claim. Id. at 492. [5] Frequently, however, proof of reliance varies from individual to individual. For example, in Stout v. J.D. Byrider, plaintiffs sought class certification alleging violations of the Ohio Consumer Sales Practices Act and the federal Truth in Lending Act arising from their purchase of motor vehicles. 228 F.3d 709 (6th Cir.2000). The core issue in the case was whether each putative class member relied upon false representations or failures to disclose, and if so, what damages were proximately caused by that reliance. Id. at 718. The Sixth Circuit explained that resolution of the issue of reliance requires an individual assessment of what documents the customer reviewed and in what manner, what representations Defendants made to each customer, and whether the customer selected the extended service agreement. Id. Because the plaintiffs were not subject to a uniform deceptive practice, the Sixth Circuit affirmed the trial court's determination that individual issues predominated over common issues with respect to causation. Id. Other courts have similarly refused to certify class actions where an individual assessment is required to determine whether a class member relied on a defendant's deceptive practice and whether that practice caused injury. See In re St. Jude Med., Inc., 522 F.3d 836, 838 (8th Cir.2008) (Because proof often varies among individuals concerning what representations were received, and the degree to which individual persons relied on the representations, fraud cases often are unsuitable for class treatment.); McManus v. Fleetwood Enters., 320 F.3d 545, 550 (5th Cir.2003) (refusing to certify a class action based on a class-wide presumption of reliance because [r]eliance will vary from plaintiff to plaintiff, depending on the circumstances surrounding the sale); Markarian v. Conn. Mut. Life Ins., 202 F.R.D. 60, 69 (D.Mass. 2001) (refusing to presume reliance or causation based on material omissions where the total mix of information made available to each purchaser was distinctive, if not unique, and the question of causation must be decided with regard to each purchaser in the context of the particular information that he or she received); Fed.R.Civ.P. 23 advisory committee's note (Discussing the 1966 Amendment to subdivision (b)(3): [A]lthough having some common core, a fraud case may be unsuited for treatment as a class action 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.). In this light, a trial court must rigorously analyze the evidence presented to determine whether the evidence supports a class-wide inference of causation. As part of this analysis, the trial court must consider not only whether the circumstantial evidence common to the class supports an inference of causation, but also whether any individual evidence refutes such an inference. BP America, slip op. at 27 (A trial court may not ignore evidence presented to refute a C.R.C.P. 23 requirement.). The trial court must then determine whether the class-wide inference causes common issues to predominate over individual issues for the purposes of C.R.C.P. 23(b)(3). Id. at 20. Ultimately, this determination is committed to the case-management discretion of the trial court. See Jackson, 262 P.3d at 880. In the instant case, the trial court certified both Classes based solely on the strength of the circumstantial evidence presented by Plaintiffs. The trial court was persuaded that causation could be inferred from: (1) Medved's use of deceptive sales documents; (2) Medved's standard practice of adding charges to vehicles for dealer-added products; (3) Medved's standard method for documenting dealer-added product installation; and (4) the absence of certain dealer records. The trial court determined that this common evidence supported a class-wide inference of causation. Based on this inference, the trial court concluded that common issues predominated over individual issues for the purposes of C.R.C.P. 23(b)(3). By focusing solely on the circumstantial evidence common to both Classes, however, the trial court failed to take into account the individual evidence presented by Medved. This failure results from the trial court's acceptance of Plaintiffs' allegation that they were not relying on face-to-face transactions to prove causation. Thus, the trial court did not consider whether the evidence submitted by Medved rebutted the class-wide inference of causation. Medved offered evidence that face-to-face interactions did occur between each Plaintiff and a Medved sales representative. Specifically, Medved presented direct evidence regarding a typical vehicle sale at a Medved dealership. Medved's sales manager Nieto explained in his affidavit that the purchase of a vehicle from a Medved dealership involves a three-step process, including the consumer's visual inspection of the vehicle on the lot, face-to-face discussions with a Medved sales representative, and a meeting with Medved's finance department. Given this common practice, a consumer may have been aware of the dealer-added items (if any) through visual inspections of the vehicle on the lot, face-to-face negotiations with a sales representative, or review of the Addendum sticker. If the consumer then voluntarily paid a final, negotiated price for a dealer-added product, there may be no causal nexus between Medved's deceptive sales documents and any injury to the consumer. That is, if the consumer observed or discussed the existence and price of the dealer-added products with a Medved sales representative, then Medved's deceptive sales documents did not necessarily cause injury. Medved also presented evidence to rebut Plaintiffs' assumption that dealer-added products were not installed where Medved lacked a Purchase or Repair Order. The evidence submitted by Medved thus suggests that individualized inquiries may be necessary to determine whether each Plaintiff relied on Medved's allegedly deceptive sales documents and whether that reliance caused injury. The trial court erred by failing to consider the individual evidence submitted by Medved. In BP America, we held that a Plaintiff may rely on class-wide inferences of reliance. Slip op. at 17. We also expressly held that a defendant may rebut a class-wide inference of reliance with individual evidence. Id. at 19 (Of course, the defendant may introduce individual evidence to rebut a class-wide inference.). We thus directed trial courts to rigorously analyze all the evidence presented to satisfy [themselves] that [the plaintiffs] have met the requirements for class certification. Id. at 27. We then upheld the trial court's determination that class-wide inferences of ignorance and reliance were appropriate despite the individual evidence submitted by BP. Id. at 27-28. Crucial to our holding was the trial court's rigorous analysis of the individual rebuttal evidence presented by BP and express determination that it was unpersuasive. Id. at 22. Here, in contrast, the trial court did not determine whether the evidence submitted by Medved rebutted a class-wide inference of causation. Instead, the trial court rested its conclusion on Plaintiffs' allegation that they were not relying on face-to-face transactions to prove causation and its determination that causation could be inferred from Medved's standard sales documents. This analysis falls short of that required by C.R.C.P. 23 and runs contrary to our decision in BP America. The decision is further problematic given that individual evidence that tends to rebut the class-wide inference of causation relied on by Plaintiffs could cause individual rather than common issues to predominate for purposes of C.R.P.C. 23(b)(3). See, e.g., In re St. Jude, 522 F.3d at 838; McManus, 320 F.3d at 550; Stout, 228 F.3d at 718; Markarian, 202 F.R.D. at 69. We thus affirm the court of appeals' judgment remanding the case to the trial court to determine whether such individualized evidence will affect the question of predominance. [6] Garcia, 240 P.3d at 381. [7]
In Hall v. Walter , this Court made explicit the requirement that a plaintiff bringing a private CCPA claim must establish that he or she suffered injury in fact to a legally protected interest. 969 P.2d at 234. Plaintiffs allege that the fact of injury can be established on a class-wide basis. Quite simply, Plaintiffs explain, all Class I members paid for dealer-added products that were never installed, while Class II members paid for inadequately disclosed dealer-added products. The trial court agreed that damages would be easily calculable and thus not central to the litigation. Normally, the need for some proof of individual damages does not preclude certification under C.R.C.P. 23(b)(3). Buckley Powder Co. v. State, 70 P.3d 547, 554 (Colo. App.2002). We have thus deferred to a trial court's decision to certify a class action despite the presence of individual damages issues. See Jackson, 262 P.3d at 890. In the instant case, however, the trial court erred by simply accepting Plaintiffs' allegation that injury could be established on a class-wide basis with Medved's deceptive sales documents and Plaintiffs' purchase of dealer-added products. As the court of appeals explained, determining whether a Plaintiff was injured may require an inquiry into each face-to-face transaction and vehicle purchase. Garcia, 240 P.3d at 381. For example, certain Class I Plaintiffs may not have suffered an injury due to Medved's deceptive sales documents if they paid a price lower than the MSRP less the value of the dealer-added, but omitted products. Id. Similarly, certain Class II Plaintiffs may not have suffered an injury if the particular price paid for a given automobile was so far below the MSRP that there was no effective charge for manufacturer-installed options, let alone dealer-added products. Id. Accordingly, the court of appeals concluded that the price paid by each customer is an important and predominant component of injury. Id. The court of appeals thus remanded the case to the trial court to consider the evidence of individual face-to-face transactions in determining whether Plaintiffs had established a class-wide theory of injury. Id. We agree with the court of appeals for the reason that the trial court failed to analyze the individual evidence submitted by Medved and consider whether that evidence rebutted Plaintiffs' class-wide theory of injury. Medved presented evidence that the price of a vehicle was often discussed during the face-to-face transactions between a consumer and a Medved sales representative. Medved also presented individual evidence demonstrating that dealer-added products were installed on numerous vehicles despite the lack of Purchase or Repair Orders. This evidence suggests that the fact finder will have to analyze each transaction and the price paid to determine whether a particular customer suffered an injury. The trial court, however, did not consider this evidence, instead simply stating that damages will be easily calculable and not central to the litigation. This truncated analysis falls short of the trial court's duty to rigorously analyze all of the evidence presented to determine whether Plaintiffs have satisfied the requirements for class certification. See BP America, slip op. at 27. We thus agree with the court of appeals that a remand is necessary for the trial court to consider the evidence regarding each sales transaction in assessing Plaintiffs' class-wide theory of injury. Plaintiffs argue, however, that there is no need to analyze each individual transaction. Plaintiffs claim that they necessarily suffered an injury by virtue of the fact that they paid for inadequately disclosed dealer-added products. That is, assuming Medved committed a uniform deceptive practice and Plaintiffs relied on that deception in purchasing dealeradded products, then the Plaintiffs invariably suffered an injury. Plaintiffs argue that this injury is particularly apparent with respect to Class I where customers paid for dealeradded products that were never installed. Medved, however, presented individual evidence and testimony rebutting these allegations. The trial court must therefore consider this evidence in assessing Plaintiffs' class-wide theory of injury. So long as the trial court rigorously analyzes this evidence, it retains the discretion to determine, to its satisfaction, whether common issues predominate over individual issues with respect to Plaintiffs' CCPA claims. See Jackson, 262 P.3d at 884.