Class Certification of Fraud Claim Denied

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A federal district court recently held that a group of aggrieved consumers will not be able to pursue their fraud claims as a class against the company that purportedly deceived them because the company's growing awareness that the customers would not receive their merchandise raised questions of fact requiring individualized adjudication.

Bassett Furniture Industries manufactures furniture that it sells through factory-owned and independent dealers. One independent dealer encountered financial difficulties, and Bassett directed the dealer to conduct a prolonged "liquidation sale," using most of the proceeds to reduce its debt to Bassett rather than to pay to obtain additional furniture from Bassett to deliver to its customers. When the dealer went out of business, a group of 188 customers who did not receive the furniture they ordered sued Bassett for fraud, arguing that the liquidation sale was a Ponzi scheme that Bassett knew would eventually collapse.

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