Consistent with its recent emphasis on the stringency of class certification requirements in consumer cases, the Third Circuit recently affirmed the denial of class certification in a consumer case involving alleged overbilling practices, which implicated differing laws of many states. This opinion will make it even more difficult for consumers to gain class certification of multistate classes when state law claims are being asserted.
In Grandalski v. Quest Diagnostics, Inc., the district court denied certification of a proposed nationwide class in an action arising out of alleged overbilling practices by Quest Diagnostics, Inc. The Grandalski plaintiffs then appealed the denial of class certification as to two claims—their state consumer fraud act and unjust enrichment claims.
On the consumer fraud claims, the district court engaged in a choice-of-law analysis to determine which states’ laws would apply to the proposed nationwide class. The court concluded that the law of each class member’s home state would apply. Because the differing consumer fraud statutes of so many states would apply, the court held, class treatment of the case would be unwieldy and therefore inappropriate. On appeal, the plaintiffs argued that the district court erred by engaging in a choice-of-law analysis at the class certification stage, citing the Third Circuit’s en banc prior decision in Sullivan v. DB Investments, Inc.
The Third Circuit in Grandalski distinguished Sullivan on the ground that it involved a settlement class, which does not pose potential manageability problems at trial as does a litigation class. Because Grandalski involved a litigation class, the Third Circuit held, it was reasonable—and, in fact, may have been indispensable—for the district court to analyze the choice-of-law issue at the class certification stage to determine whether the case would involve intractable management problems at trial.
The Third Circuit further upheld the district court’s conclusion that the plaintiffs had not met their burden of demonstrating that “grouping” the various state laws would ameliorate the manageability problems. The court noted that while such grouping generally may be a permissible approach to nationwide class litigation, the plaintiffs bear a “significant burden” to show that grouping is a workable solution. The Grandalski plaintiffs, the court held, failed to provide sufficient analysis to demonstrate how the grouped state laws would apply to the facts of the case.
Regarding the unjust enrichment claims, the district court denied class certification because individualized proof would be required to show that ostensible overbilling of each class member was actually fraudulent or unjust, given that there were numerous potential legitimate explanations for the amount of a bill. Although the Third Circuit did not agree with the district court’s decision to decide this issue under the class “ascertainability” requirement, the court nevertheless affirmed under Rule 23(b)(3)’s predominance requirement. The Third Circuit reasoned that the individual inquiries that would be required to determine whether an alleged overbilling constituted unjust enrichment are incompatible with a class action.
Grandalski adds to the recent trend in the Third Circuit—exemplified by such cases as Marcus v. BMW of North America, LLC, Hayes v. Wal-Mart Stores, and Carrera v. Bayer Corp.— in which the court has made clear that certification of consumer cases is becoming increasingly more difficult, regardless of whether the claims are asserted against manufacturers, retailers or consumer financial service providers.
