CHARLESTON – A recent state Supreme Court ruling about class action lawsuits has some in the legal community dismayed about the way such cases are certified in West Virginia.
Last month, the court issued a memorandum decision in which it unanimously declined to issue the writ of prohibition to prevent a case from being certified as a class action. The underlying case is a 2011 Kanawha Circuit Court case in which three people alleged U-Haul violated provisions of the state’s consumer laws and was otherwise liable for improper charges in its rental contracts.
They challenged an “environmental” fee that was not required by any government regulation but was included as a mandatory charge with every rental. U-Haul said a customer could request a refund of the environmental fee, but this policy was not explained to customers.
The record established that there was a variety of ways that customers could obtain a rental contract, including telephonically, electronically, or by a face to face encounter with a U-Haul representative. The court found that the factors required for class certification under Rule 23 had been met including, inter alia, the requirements of commonality and predominance. The circuit court entered a class certification order and the defendant, U-Haul, filed for a writ of prohibition.
Charleston attorney Anthony Majestro successfully argued the case on behalf of the plaintiffs.
“We were pleased the court unanimously recognized that (Kanawha Circuit) Judge (Joanna) Tabit’s thoughtful and detailed opinion was correct,” said Majestro, who also is a former president of the West Virginia Association for Justice. “The affirmance was of a respected middle of the road judge who has a background as a defense lawyer.”
However, others think the way West Virginia certifies class actions is too lax.
“The biggest problem with how our Supreme Court deals with class actions is that they insist on applying an old standard for certification that makes it almost a fait acompli that a class will be certified,” Huntington defense attorney Marc Williams said. “This hyper-liberal standard for certification makes us an outlier in comparison to how class certification is dealt with in the federal courts and in other state courts.”
“That has not been my experience,” said Majestro, a partner at Powell & Majestro. “Trial courts and Supreme Court very carefully looks at class certifications. When appropriate, they will approve. When rules, nearly identical to federal rules, aren’t met, they turn them down.
“This is the kind of case that’s appropriate to be treated as a class. It’s a straight-up consumer case. The allegation is that the defendants deceptively charged customers from $1 to $5. This is the type of case that is perfect for class actions because, absent of remedies like class actions, no one is going to file a suit for $1 to $5.
“The bottom line is that the idea that West Virginia’s rules are out of control is just not there.”
Majestro said there safeguards are in place to make sure the rule don’t go too extreme.
“If it does go too far, there are remedies,” he said. “We don’t need to change things to make the rules out of step with federal rules or those of other states. If we do that, we just incentivize a lot of businesses to cheat people out of a chance to take their claims to court.”
Williams argues that the state’s class actions laws need to be a little more in line with other states. He said the state relies on a 2003 state Supreme Court ruling that makes it too easy to get a class certified. Written by former Justice Larry Starcher, the 2003 Rezulin ruling requires that the party seeking class certification show that “there are questions of law or fact common to the class.” A common nucleus of operative fact or law is usually enough to satisfy the commonality requirement. The threshold of “commonality” is not high, and requires only that the resolution of common questions affect all or a substantial number of class members.
“If that U-Haul case was in federal court, it wouldn’t be certified,” said Williams, a partner at Nelson Mullins. “Federal rules are harder on what it takes to certify a class. In West Virginia, it’s basically a rubber stamp.”
Williams said the trend, starting with the U.S. Supreme Court, has been “to require a more rigorous showing that there are not only common questions at play, but common answers to those questions.”
“Further, when individualized proof is required to make the case of liability, the Supreme Court has made clear that class certification is improper,” Williams said. “Unfortunately, our Supreme Court of Appeals has been reluctant to follow this clear trend. As a result, trial judges are very reluctant to deny certification, even when individualized proof drives the determination of liability.
“Normally there has to be a common issue that covers each of the claims making it appropriate to consider as a collective action. The Rezulin ruling says that virtually any common claim is sufficient to justify class certification.”
And once it is certified as a class, Williams said it often is too late.
“In class actions, once a class is certified, it usually resolves, because the risks are too great to take the case to trial,” he said. “So all of the fight is on the issue of certification. State court class actions in West Virginia are almost always certified.”
Williams said that isn’t the case in federal court.
“The U.S. Supreme Court has made it clear in a line of cases over the last decade that certification should be only approved when there are not only common questions in a case, but common answers to those questions,” Williams said. “Justice (Antonin) Scalia in the Walmart v. Dukes case said that certification should be narrowly construed and that the commonality factor … requires that any individualized proof on liability precludes certification.”
The executive director of a statewide legal reform group disagreed with the Supreme Court ruling as well.
“Unfortunately, with the U-Haul decision, the Supreme Court of Appeals of West Virginia continues to apply a standard of certification for class action cases that is outside normal standards when compared to other states,” said Roman Stauffer of West Virginia Citizens Against Lawsuit Abuse. “The federal court system and some state courts are moving to tighten the standard for class certification.
“For many years, we have encouraged state legislators to look at class action reforms. We are hopeful this decision will prompt them to take much-needed action to bring West Virginia’s class action certification standards in line with a majority of other states.”
West Virginia Supreme Court of Appeals case number 17-1052