Opinion ID: 2355008
Heading Depth: 1
Heading Rank: 2

Heading: Identity of the Class

Text: For its second point on appeal, Lenders argues that the trial court abused its discretion in certifying a class because the members cannot be identified without a manual review of more than 50,000 of its real-estate closing files. Lenders argues that such a manual review is not an administratively feasible way of identifying the class members. Thus, it asserts that the trial court erred in concluding that the class met the criterion of numerosity. In a related argument, Lenders contends that the class definition is imprecise and overbroad. We disagree with both arguments.
As we observed in Lenders I , six criteria must be met before a suit may be certified as a class action under Rule 23: (1) numerosity; (2) commonality; (3) typicality; (4) adequacy; (5) predominance; and (6) superiority. The first criterion, numerosity, requires that the class is so numerous that joinder of all members is impracticable. Ark. R. Civ. P. 23(a)(1). The exact size of the proposed class and the identity of the class members need not be established to certify a class; instead, the numerosity requirement may be supported by common sense. See BPS, Inc. v. Richardson, 341 Ark. 834, 20 S.W.3d 403 (2000); Mega Life & Health Ins. Co. v. Jacola, 330 Ark. 261, 954 S.W.2d 898 (1997); Cheqnet Systems, Inc. v. Montgomery, 322 Ark. 742, 911 S.W.2d 956 (1995). Thus, there is no bright-line rule for determining how many class members are required to meet the numerosity factor. Mega Life, 330 Ark. 261, 954 S.W.2d 898. Suffice it to say that [w]here the numerosity question is a close one, the balance should be struck in favor of a finding of numerosity in light of the trial court's option to later decertify. Fraley v. Williams Ford Tractor & Equip. Co., 339 Ark. 322, 344, 5 S.W.3d 423, 437 (1999) (citing Evans v. U.S. Pipe & Foundry Co., 696 F.2d 925 (11th Cir.1983); Foster v. Bechtel Power Corp., 89 F.R.D. 624 (E.D.Ark.1981)). In the present case, the trial court concluded that the requirement of numerosity was met based on the facts that (1) Lenders has closed more than 50,000 real estate transactions between 1997 and 2001; (2) the evidence showed that Lenders routinely, or more often than not, charges a document-preparation fee in such transactions; (3) the issues raised in this case would be present in most of the closings in which Lenders participated; and (4) the act complained of by Chandler, namely the charging of a document-preparation fee, would be typical of Lenders's actions in other closings. These findings support the trial court's conclusion that the class met the numerosity requirement.
In a related argument, Lenders challenges the sufficiency of the class definition set out by the trial court: All persons who paid Lenders Title Company a document preparation fee in any transaction after October 23, 1997. Lenders asserts that this definition is too broad and thus impermissibly requires the trial court to inquire into the facts of each individual case in order to determine whether the person is a class member. It also asserts that there is no administratively feasible way of identifying the class members, because that would require a manual review of more than 50,000 of its closing files. To support its position, Lenders relies on this court's holdings in State Farm Fire & Cas. Co. v. Ledbetter, 355 Ark. 28, 129 S.W.3d 815 (2003), and Ferguson v. The Kroger Co., 343 Ark. 627, 37 S.W.3d 590 (2001). Those cases are distinguishable. In Ledbetter, 355 Ark. 28, 36, 129 S.W.3d 815, 820-21, the class was defined as [A]ll those insureds of Defendant under Form FP7955 who have a property damage claim or who have had an unpaid property damage claim under said policy that involves a common question of law or fact with the Plaintiff[.] (Emphasis added.) In that case, the insurer, State Farm, argued that it would be impossible to prove whether or not a policyholder has a common question of law or fact with Ledbetter, unless each of the homes of the potential class members is inspected for foundation damage alleged to have resulted from water leakage. Thus, an individual inspection of each policyholder's home would have been necessary to determine whether a policyholder was a member of the class. This court reversed the class certification on the ground that the class definition provided no objective criteria for ascertaining class membership and also required the trial court to delve into the underlying merits in order to determine who is a class member. Thus, this court concluded that the class definition was too broad and imprecise because potential members could not be determined by objective criteria without necessitating the trial court's inquiry into the merits of the plaintiff's cause of action. In Kroger, 343 Ark. 627, 37 S.W.3d 590, the plaintiffs proposed that the class be defined as persons who were misled into shopping at a Kroger store because of double-coupon advertisements from 1990 through 1992. Kroger argued that under such a definition, it would be virtually impossible to identify members of the proposed class. This court agreed, holding that in order to be certified as a class action under Rule 23: [T]he class description must be sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member of the proposed class. Furthermore, for a class to be sufficiently defined, the identity of the class members must be ascertainable by reference to objective criteria. Id. at 631, 37 S.W.3d at 593 (quoting 5 Jeremy C. Moore, Moore's Federal Practice § 23.2(1) (Matthew Bender 3d ed. 1997)). Under the class definition proposed by the plaintiffs, anyone could claim to have been induced to shop at Kroger to take advantage of the double coupons, and there would be no objective criteria, i.e., records, to verify such claim. In the present case, the trial court defined the class in a precise, objective way as all persons who paid Lenders a document-preparation fee in any transaction after October 23, 1997. The class in this case is identifiable from objective criteria, namely the payment of a document-preparation fee in a closing transaction with Lenders. In contrast, the proposed class in Kroger could have included anyone who claimed to have been induced to shop there to take advantage of the double-coupon advertisement. There were no objective criteria to verify if persons were, in fact, members of the class. Moreover, unlike that in Ledbetter , the class definition here goes beyond the mere tracking of the language of Rule 23 that the members share a common question of law or fact with Chandler. Additionally, unlike Ledbetter , the identity of the class members in this case can be ascertained without an investigation into the merits of each individual's claim. We are not persuaded by the argument that it is not administratively feasible for Lenders to have to manually review each of the more than 50,000 closing files to identify the class members. Instead, we agree with Chandler that Lenders should not be allowed to defeat class certification by relying on its inadequate filing and record system. The fact that Lenders cannot discover such information by the push of a button on a computer does not render the class identification any less administratively feasible. Administratively feasible does not mean convenient. Were Lenders to succeed on this point, it would undoubtedly encourage other businesses to keep bad records for the purpose of avoiding class actions. We thus affirm on this point.