Today’s guest post is by Jim Sargent, of Lamb McErlane, who was one of the winning attorneys in the Basile v. H&R Block decision his post discusses. Way to go Jim (and everybody else on the team)! Bexis and Jim go back a ways, since Bexis wrote PLAC amicus briefs in the Samuel-Bassett case that Jim mentions in this post. As always, the guest blogger gets all the credit/shoulders all the blame for his post (unless the links don’t work – that would be Bexis’ fault).
Basile, although not a drug/device opinion, is an important class certification decision in Pennsylvania.
The Pennsylvania Supreme Court’s most recent decision on class actions is in Basile v. H&R Block, Inc., ___ A.3d ___, 2012 WL 3871504, slip op. (Pa. Sept. 7, 2012) (“Basile III“). Basile was a putative class action commenced way back in 1993, claiming that the defendant breached a fiduciary duty to its customers by not sufficiently disclosing that its “rapid refunds” of federal taxes actually were high interest consumer loans. Plaintiffs claimed that the defendant was a “fiduciary” as a way of avoiding reliance and individualized issues that prevent certification of this sort of claim.
The class was certified in 1997 by the late Judge Bernard Avellino, based on a “presumption” that an agency relationship existed between the defendant and some 600,000 customers. Over the next 15 years there then ensued 9 separate appeals – the case was before the Superior Court 5 (twice before the court en banc) times and the Supreme Court 4 times – which well may make it the longest appellate record in Pennsylvania history.
On the first appeal, the Supreme Court rejected the notion that any agency relationship supported Plaintiffs’ claim that a fiduciary duty existed between the defendant and the class. Basile v. H & R Block, Inc., 761 A. 2d 1115 (Pa. 2000) (“Basile I“). In its September 7, 2012 opinion the Court reiterated that it meant what it said the first time, rejecting the contention that a “confidential relationship” (the “fiduciary” claim under another name) existed, thus knocking out the remaining foundation for Plaintiffs’ claim.
In the course of the 19 year history in Basile, the Supreme Court clarified the law of agency, Basile I, supra, 761 A. 2d 1115, the aggrieved party doctrine (after some Superior Court funny business with appellate issues), Basile v. H & R Block, Inc., 973 A. 2d 417 (Pa. 2009) (“Basile II“), and now, in this latest opinion, the “confidential relationship” doctrine.
Probably most important in the long term, though, is what the Court had to say about the principles governing class certification. .
Its September 7 Basile III opinion reversed the Superior Court and affirmed the trial court decertification order. Think about what the Superior Court had done. It had held that that this class had to be certified; that decertification was an abuse of discretion. Writing in a 6-0 decision (Justice Orie-Melvin attended argument but is now suspended from the Court), Justice Saylor disposed of some eighty-year-old dictum, and held that a “confidential relationship” sufficient to give rise to a fiduciary duty is “‘intensely fact-specific,’” 2012 WL 3871504, at *7-8, and not suited to class-certification. The Court therefore held that the class was properly decertified.
Justice Saylor’s rulings on class action procedure and his reflections generally on the class action mechanism bear taking specific note. Speaking for a unanimous court, he rejected the Superior Court’s attempt to flip the burden of proof on class certification. Evidence sufficient to defeat summary judgment (where all inferences benefit the plaintiff), does not create grounds for certification of a class (where the plaintiff bears the burden). To support class certification facts must be “properly determined . . . not assumed.” 2012 WL 3871504, at *6. “[D]eferring close consideration of class certification to the time when facts are determined by a jury at trial (namely, in connection with the verdict) is incompatible with the governing procedural rules.” Id.
Towards the end − after once describing class actions as “collectivized treatment,” id. at *6 − the opinion returns to this theme, stating: “We are cognizant of the tendency toward sanctioning the use of class actions as a convenience to address colorably meritorious claims in an aggregate fashion, where these might not otherwise be capable of being redressed practically on an individual basis.” Id. at *8. However, the Court rejected this temptation, holding that the approach to class treatment reflected in Pennsylvania’s class action rules “stems from limitations inherent in the judicial rulemaking process, the impact of collectivized treatment of individual claims on defendants’ substantive rights,” and “the limited policymaking role of the courts (as compared with the legislative branch) in terms of manipulating substantive law.” Id.
[Editor’s note: On this blog, we refer to the “tendency” that Court rejected in Basile III “judicial triumphalism.”]
The Court’s rejection of Plaintiffs’ invitation to fashion a judicial solution to a legislative problem should be applauded. In contrast, 9 months earlier in Samuel-Bassett v. Kia Motors America, Inc., 34 A.3d 1 (Pa. 2011), the same Court approved certification of a class of automobile owners on claims of out-of-pocket expense for brake repairs under an express warranty, where there was no proof that each class member had sustained any (let alone similar) repair expenses. The Court stated: “…a certification proceeding is a preliminary inquiry whose purpose is to establish who the parties to the class action are ‘and nothing more.’” 34 A.3d at 21-22 (quoting Pa. R.C.P. No. 1707 cmt). That plaintiff was not required to prove anything about the defendant’s liability at the certification stage and the trial court was prohibited from factoring the perceived adequacy of the “underlying merits of the class’s claims into the certification decision.” Id. at 22. The Court continued: “By the same token, pre-trial class certification proceedings do not require a mini-trial; the class is not obligated to establish liability during the class certification phase.” Id. (citations omitted). The Court then discounted the importance of individual proof of out-of-pocket costs for each class member: “As our previous analysis shows, [plaintiff] and the class adduced sufficient evidence during certification proceedings to show a common source of liability. Any question regarding individual expenditures resulting from varying attempts to repair the defect was not a ground to reject the commonality found on other issues, to defeat the predominance of common issues and, ultimately, to deny certification of the class at the preliminary stages of trial.” Id. at 28.
But less than a year later, the Court is rejecting, unanimously, “assumed facts” and requiring “close consideration of class certification”in the name of “limitations inherent in the judicial rulemaking process” and “the limited policymaking role of the courts” in Basile III.
There is no easy explanation for the differences between Samuel-Bassett and Basile III. It may be significant that Samuel-Bassett languished with the Court for 3 1/2 years after argument (during which time Basile II author Justice Greenspan left the bench), whereas Basile III was decided with lightening speed for the Court (4 months from May 8 argument to September 7 decision).
Some will always say, most particularly Plaintiff’s counsel in Samuel-Bassett, that the two decisions can be distinguished purely on the grounds of “waiver,” since the Samuel-Bassett Court concluded that defense trial counsel had waived objection to the molded verdict after trial. But Justice Saylor’s strong dissent in Samuel-Bassett argued that there was no waiver and that Samuel-Bassett would not be cited as a waiver case in the future. 34 A.3d at 64. Moreover, “waiver” usually gives appellate judges a quick exit, and yet Chief Justice Castille wrote an 80-page opinion in Samuel-Bassett that labored hard to justify the result, which certainly didn’t conserve judicial resources, and is not convincing.
Others will say that the two decisions can’t be reconciled. After all, Justice Saylor, who vehemently dissented in Samuel-Bassett, wrote for the unanimous court in Basile III. They will say there are now two alternative sets of policies in Pennsylvania: the “class actions are favored” rationale and acceptance of collectivized proof in Samuel-Bassett and the proscription against using procedural vehicles to change substantive law in Basile III – the second of which appears to line up better with the evolving federal standards articulated in Hydrogen Peroxide and Dukes.
It may be that, Justice Saylor, who is next in line to be Chief, will usher in a new era. Or perhaps the Court is slowly awakening to the misuse of the class action mechanism in circumstances where the effect is to relieve plaintiffs of the burden of proving all elements of their claims. Philadelphia has earned a reputation nationally for favoring plaintiffs in class actions that might not fly in other jurisdictions. See The City of Unbrotherly Torts, Wall St. J., Dec. 3, 2011 (noting that Philadelphia state court is a “destination of choice” for plaintiff classes due to fewer settlements and higher verdicts); see also Am. Tort Reform Found., Judicial Hellholes 2011-2012, at 3–8 (2011) (listing Philadelphia as the number one “judicial hellhole”); id. at 2 (“Judicial Hellholes have been considered places where judges systematically apply laws and court procedures in an unfair and unbalanced manner.”) (emphasis omitted); id. at 3 (“Of greatest concern is the Complex Litigation Center (CLC) in Philadelphia, where judges have actively sought to attract personal injury lawyers from across the state and the country.”). In Daniel v. Wyeth, Nos. 63-64 EDA 2011, before the Supreme Court from the decision of a panel of the Superior Court overturning the trial court’s JNOV on punitive damages, Justice Castille was reported to have remarked that sustaining the award would result in Pennsylvania being labeled a “judicial hellhole.” Legal Intelligencer, 9/12/12. Perhaps the Court finally has gotten the message.