Custom Hair Designs by Sandy v. Cent. Payment Co.

• Decision Date: 30 December 2020
• Docket Number: No. 20-1677,20-1677
• Parties: CUSTOM HAIR DESIGNS BY SANDY et al., Respondent v. CENTRAL PAYMENT CO., LLC, Petitioner
• Court: U.S. Court of Appeals — Eighth Circuit

984 F.3d 595

CUSTOM HAIR DESIGNS BY SANDY et al., Respondent

v.CENTRAL PAYMENT CO., LLC, Petitioner

No. 20-1677

United States Court of Appeals, Eighth Circuit.

Submitted: November 18, 2020

Filed: December 30, 2020

Rehearing and Rehearing En Banc Denied February 11, 2021

Eric David Barton, I, Adam S. Davis, Melody R. Dickson, Tyler W. Hudson, Sarah Steen Ruane, WAGSTAFF & CARTMELL, Kansas City, MO, for Plaintiffs - Appellees.

David L. Balser, Jonathan R. Chally, Brandon R. Keel, Allison H. White, KING & SPALDING, Atlanta, GA, Kenneth W. Hartman, BAIRD & HOLM, Omaha, NE, Matthew V.H. Noller, KING & SPALDING, Sacramento, CA, Ashley Charles Parrish, KING & SPALDING, Washington, DC, for Defendant - Appellant.

Adam W. Hansen, APOLLO LAW LLC, Minneapolis, MN, Kyle Robert Kroll, WINTHROP & WEINSTINE, Minneapolis, M, for Amicus on Behalf of Appellee Main Street Alliance.

Before BENTON, ERICKSON and GRASZ, Circuit Judges.

BENTON, Circuit Judge.

Custom Hair Designs by Sandy and Skip's Precision Welding, LLC brought a class action alleging breach of contract, state-law fraudulent concealment, and violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). 18 U.S.C. §§ 1962(a), (c) & (d) . The district court certified the proposed class. Central Payment Co., LLC (CPAY) appeals. Having jurisdiction under 28 U.S.C. § 1292(e) and Federal Rule of Civil Procedure 23(f), this court affirms certification.

"District courts have broad discretion to determine whether certification is appropriate." Harris v. Union Pacific RR Co. , 953 F.3d 1030, 1033 (8th Cir. 2020). "In reviewing the district court's certification decision, the district court's rulings on questions of law are reviewed de novo and its application of the law is reviewed for an abuse of discretion." Id.

The class are over 160,000 small retailers using CPAY for credit card processing. CPAY does not employ its (loosely affiliated) agents. They use form contracts with blanks for the pricing terms, which are subject to negotiation. Individual retailers can select from two basic pricing schemes—"pass-through" or "tiered" (by class of transaction). Both focus on the price-per-transaction that credit card issuers impose. Changes to the price-per-transaction must be approved by the issuing banks under the terms of CPAY's form contract.

Plaintiffs allege CPAY misrepresented a number of fees, added fees with no value to retailers, and inflated fees without prior approval from issuing banks. Plaintiffs stress that the FTC previously barred, for fraud, CPAY's founders from selling auction guides. See Federal Trade Comm'n, California Defendants that Deceptively Marketed and Sold Auction Information Guides for Homes and Cars Agree to Pay Consumer Redress to Settle FTC Charges , Jan. 17, 2001, https://www.ftc.gov/news-events/press-releases/2001/01/california-defendants-deceptively-marketed-and-sold-auction. CPAY moved for summary judgment. In a single order, the district court denied summary judgment and certified the class.

This court has jurisdiction to review only the class certification, so a searching inquiry of the record is inappropriate. Postawko v. Missouri Dep't of Corr. , 910 F.3d 1030, 1037 (8th Cir. 2018) ("Merits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied."). "Moreover, a defendant bears a more onerous burden in challenging certification where the initial certification decision was carefully considered and made after certification-related discovery." Vogt v. State Farm Life Ins. Co. , 963 F.3d 753, 765 (8th Cir. 2020) (cleaned up).

I.

CPAY argues the district court failed to adequately explain its certification decision.¹ The district court must engage in a "rigorous analysis" of Federal Rule 23 certification. Elizabeth M. v. Montenez , 458 F.3d 779, 784 (8th Cir. 2006). "The same analytical principles govern Rule 23(b)." Comcast Corp. v. Behrend , 569 U.S. 27, 34, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013). This court previously rejected a "district court's predominance analysis [that] consisted of one short paragraph, which concluded that the plaintiffs ‘as a whole do in fact allege and have injury’ and that ‘[t]he same evidence will be used to establish classwide proof.’ " Harris , 953 F.3d at 1037-38 (second alteration in original). "[A]t a minimum the rule requires a district court to state its reasons for certification in terms specific enough for meaningful appellate review." In re Target Corp. Customer Data Sec. Breach Litig. , 847 F.3d 608, 612 (8th Cir. 2017).

CPAY argues Harris requires reversal. The district court here made specific findings of fact. Contrary to CPAY's assertion, the district court's decision is specific enough. In Harris , this court did not reverse due to a procedurally inadequate analysis of the Rule 23 prerequisites; instead, this court reached the merits , determining the district court abused its discretion in certifying. See Harris , 953 F.3d at 1039.

Finally, CPAY ignores that the district court issued an order that included its denial of summary judgment. Because the court addressed the merits in its summary-judgment analysis, and thus mentioned them only briefly in the class certification section, the court need not repeat its view of the record in each section of an order. The district court here engaged in a sufficiently rigorous analysis.

II.

"Before a class may be certified, Rule 23 requires that plaintiffs meet all of Rule 23(a) ’s requirements and satisfy one of the three subsections of Rule 23(b)." Harris , 953 F.3d at 1033. " Rule 23(b)(3) ... requires that ‘questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.’ " Id. , quoting Wal-Mart Stores, Inc. v. Dukes , 564 U.S. 338, 362, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011).

A.

CPAY argues that the district court erred in determining that common questions predominate. This court begins by "considering the nature of plaintiffs’ claim to determine whether it is suitable for class certification." Id . This court does not need to conclude whether the theory of liability is viable. Id. at 1039. This court denies certification only if the theory of liability "is a highly individualized question that does not allow class certification under Rule 23(b)(2) and (b)(3)." Id.

Predominance subsumes the commonality requirement, so both can be analyzed through the lens of predominance. Amchem Prods., Inc. v. Windsor , 521 U.S. 591, 609, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). Predominance gauges "the relationship between common and individual questions in a case." Tyson Foods, Inc. v. Bouaphakeo , ––– U.S. ––––, 136 S. Ct. 1036, 1045, 194 L.Ed.2d 124 (2016). "An individual question is one where members of a proposed class will need to present evidence that varies from member to member, while a common question is one where the same evidence will suffice for each member to make a prima facie showing or the issue is susceptible to generalized, class-wide proof." Id. (quotation omitted). "When ‘one or more of the central issues in the action are common to the class and can be said to predominate, the action may be considered proper under Rule 23(b)(3) even though other important matters will have to be tried separately, such as damages or some affirmative defenses peculiar to some individual class members.’ " Id. , quoting 7AA C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure , § 1778, pp. 123–124 (3d ed. 2005).

1.

Common questions and common answers predominate here. Dukes , 564 U.S. at 350, 131 S.Ct. 2541. First , all claims deal with either a common scheme of fraud or a term common to all contracts with CPAY. True, the negotiated pricing terms are different and some contracts authorize some fees that plaintiffs allege were fraudulent. However, all plaintiffs allege failure to get bank preauthorization. The relevant contract term was uniform. Compare Webb v. Exxon Mobil Corp. , 856 F.3d 1150, 1156-57 (8th Cir. 2017) (finding breach of contract insufficiently common where extent of pollution was property-specific), with McKeage v. TMBC, LLC , 847 F.3d 992, 999 (8th Cir. 2017) (finding commonality satisfied where breach arose from form contract term). Plus, the statements communicating changes to billing were nearly identical.

Second , any pricing differences would not affect liability, only damages. If CPAY engaged in a common scheme to defraud plaintiffs, the difference between the bank-authorized pass-through costs and CPAY's charges measures only the damages to individual class members. At worst, this requires individual proof at the damages phase, which the Court approved in Tyson . Tyson , 136 S. Ct. at 1045. Plus, to measure damages the plaintiffs plan to use CPAY's database. This mirrors the evidence approved in Tyson , where a statistical expert determined the average amount of time employees spent donning and doffing their gear. Id. at 1046. Slight variation in actual damages does not defeat predominance if there are common legal questions and common facts.

Third , that some contracts authorize a "PCI Noncompliance Fee" or a "TSSNF Fee" does not defeat predominance. The actual extent of inquiry required here is cursory. Plaintiffs’ expert, in calculating damages, need identify only whether a contract authorized a PCI or TSSNF fee. Because this inquiry is not highly individualized, it does not defeat predominance. See id .

Fourth , that changes in bank rates cause tier shifts does not defeat predominance. Plaintiffs’ claim is that the issuing banks did not change their interchange rates, but CPAY moved whole classes of transactions to a higher-priced tier. If issuing banks did change interchange fees, plaintiffs’ claim fails. If no change occurred, CPAY's defense...