CHARLESTON – A state Supreme Court ruling could change the way state courts have to look at certifying classes in potential class-action lawsuits.
In a June 5 opinion, the justices ruled that a Monongalia Circuit Court judge exceeded his powers by certifying a class “while failing to conduct a sufficiently thorough analysis of the case to determine whether the commonality required for class certification … is present.”
The justices remanded the case back to Circuit Judge Phillip D. Gaujot, urging him to determine if the requirements for a class are met and, if so, to “craft a class definition consistent with such findings.”
Williams
In the underlying cases, two men – Christopher Thomack and Joseph Michael Jenkins – were injured in separate accidents. They filed lawsuits in Monongalia Circuit Court, and their attorneys requested copies of the men’s medical records from West Virginia University Hospitals Inc. and West Virginia United Health System Inc. Thomack’s attorney was charged $514.40 for his medical records by WVUHS, and Jenkins’ attorney was charged $656.80. Those totals were 40 cents per page plus a $10 processing fee. WVUHS charged by the page even though the records were provided as images on a computer disc.
Both thought the fees were illegal. They filed lawsuits about the fees in Monongalia Circuit Court in 2013. The cases were consolidated. The next year, they filed an amended complaint seeking class-action status.
The hospitals argued that commonality as “the crux of the case” and asked the circuit judge to “look at … the kind of proof that’s going to be necessary for (the class plaintiffs) to prevail.” While all of the plaintiffs were charged 40 cents per page and the $10 processing fee, the hospitals believed commonality was absent.
Still, Gaujot certified the class on April 16, 2014, and the class definition was modified in 2015.
But in 2017, the state Supreme Court issued two decisions regarding commonality that the hospitals argued “undercut the circuit court’s class certification decisions.” The hospitals moved to decertify the class because Jenkins had yet to pay his attorney for the cost of obtaining the medical records. They also were critical again of the commonality issue.
Gaujot denied the motion to decertify the class on Feb. 23, 2018. But the class definition was modified again to include attorneys “who have requested and paid for medical records on behalf of their patient clients.”
The hospitals filed their writ of prohibition with the state Supreme Court on Oct. 1, 2018 challenging Gaujot’s Feb. 23 order. They argued that the class lacks the features of commonality and ascertainability as required by Rule 23 of the West Virginia Rules of Civil Procedure.
To be certified as a class, a circuit court must decide if the parties satisfy all four prerequisites of Rule 23 – numerosity, commonality, typicality and adequacy of representation.
“That does not mean, however, that certification determinations are perfunctory,” Justice Tim Armstead wrote in the opinion. “The plaintiff or defendant who proposes certification bears the burden of proving that certification is warranted. The circuit court must give careful consideration to whether the party has met that burden.”
In this case, Armstead writes, the determination of commonality necessarily required a review of the alleged harm suffered by the plaintiffs.
“(Thomack and Jenkins) believe – and the circuit court agreed with them – that the hospitals’ uniform charging practices violated (state code),” the opinion states. “”They concede that some individualized proof may be necessary to determine damages, but they believe that the core issue of liability may be determined by aggregate proof.
“The hospitals repeatedly challenged this assertion. On their reading of the statute, individualized proof will be necessary to determine not just damages but liability itself.”
Essentially, the hospitals argued that each request for medical records will have to be examined to decide if they charged more than “all reasonable expenses incurred in complying.”
“The statute is framed such that liability and damages are two sides of the same coin, and we fail to see how a plaintiff could prove that a charge exceeded actual expenses, thus, establishing liability, without also proving by how much the charge exceeded actual expenses, and thereby establishing the amount of damages,” the opinion states. “A charge of $400 might be lawful for one request and unlawful for another.
“The fact that the hospitals charged all class member by the page (or by the image) does not change the statute or the fact that the statute’s terms define the boundary between lawful and unlawful charges.”
The justices say these questions must be decided by the circuit court.
“It does not appear that the circuit court has addressed the question of commonality with sufficient factual findings and conclusions to allow us to conclude that its certification decision and subsequent refusal to decertify the class were a product of ‘a thorough analysis,’” the opinion states. “The circuit court persisted in finding commonality without ever truly addressing the hospitals’ arguments or indicated with clarity the rational for such findings.
"We find that the circuit court exceeded its jurisdiction by failing to conduct a sufficiently thorough analysis of whether the commonality for class certification ... is present," Armstead wrote. "Accordingly, we grant the writ of prohibition as moulded, vacate the circuit court's order denying the hospitals' motion to decertify the class and remand this case for further actions consistent with this opinion."
Marc Williams, one of the attorneys representing the hospitals in this case, was pleased with the ruling.
“We’re gratified that the Supreme Court of Appeals has unanimously held that the standards for class certification in state courts should be more in line with the federal courts,” said Marc Williams, managing partner of Nelson Mullins in Huntington. “It increases predictability for litigants on both sides.”
Williams has long argued that the state’s class actions laws need to be a little more in line with other states and with federal courts.
“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,” Williams told The West Virginia Record last year when talking about another class certification issue. “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.”
Williams has said the state has relied 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.
“Federal rules are harder on what it takes to certify a class,” Williams said. “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.”
Representing the hospitals in this case were Williams, Alexander L. Turner and Christopher D. Smith of Nelson Mullins as well as Christine S. Vaglienti of WVU Hospitals. Representing the potential class were David E. Goddard and Edmund L. Wagoner of Goddard & Wagoner in Clarksburg, Christopher J. Regan and Laura P. Pollard of Bordas & Bordas in Wheeling as well as David J. Romano and Jennifer L. Finch of Romano Law Offices in Clarksburg.
Chief Justice Beth Walker, who worked for WVU Health Systems prior to joining the court, and Justice Margaret Workman recused themselves from the case. Circuit Judges Joseph Reeder of Putnam County and Jacob Reger of the 26th Circuit (Lewis and Upshur counties) heard the case in their place.
West Virginia Supreme Court of Appeals case number 18-0841