Ely Enters., Inc. v. Firstmerit Bank, N.A.
| Decision Date | 16 May 2013 |
| Docket Number | No. 98692.,98692. |
| Citation | 992 N.E.2d 483 |
| Parties | ELY ENTERPRISES, INC., Plaintiff–Appellee v. FIRSTMERIT BANK, N.A., Defendant–Appellant. |
| Court | Ohio Court of Appeals |
OPINION TEXT STARTS HERE
Philip F. Downey, Vorys, Sater, Seymour and Pease, L.L.P., Akron, OH, Anthony J. O'Malley, Vorys, Sater, Seymour and Pease, L.L.P., Cleveland, OH, William A. Sieck, Vorys, Sater, Seymour and Pease, L.L.P., Columbus, OH, for appellant.
Mark Schlachet, Beachwood, OH, Scott E. Gant, William A. Isaacson, Boies, Schiller & Flexner, L.L.P., Washington, DC, Steven M. Weiss, Law Offices of Steven M. Weiss, Cleveland, OH, for appellees.
Before: CELEBREZZE, P.J., ROCCO, J., and McCORMACK, J.
{¶ 1} Appellant, FirstMerit Bank, N.A. (“FirstMerit”), brings this appeal from the certification of a class of plaintiffs seeking damages stemming from the way FirstMerit calculated interest in commercial loans from 1993 to the final adjudication in this case. FirstMerit argues that class certification was inappropriate because the lead plaintiff, Ely Enterprises, Inc. (“Ely”), appellee here, does not satisfy the Civ.R. 23 requirements. After a thorough review of the record and law, we reverse and remand.
{¶ 2} Ely sought and obtained a commercial loan from FirstMerit, which contained a provision that set interest at a rate of seven percent per annum. A later provision of the loan agreement specified that interest would be calculated using a formula different from a standard 365–day calendar year. This formula, commonly known as the 365/360, defined the way interest would be calculated as: “[B]y applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.”
{¶ 3} For example, a loan of $100,000 at a specified interest rate of seven percent per annum would yield:
+-----------------------------------------------------------------------------+
¦ ¦7.0% ¦x ¦$100,000 ¦x ¦365 days ¦
+-------------+---------+--+---------+--+-------------------------------------¦
¦ ¦360 ¦ ¦ ¦ ¦ ¦
¦ ¦days ¦ ¦ ¦ ¦ ¦
+-----------------------------------------------------------------------------+
When this method of calculation is used, the amount of interest owed would be $7,097.22 in a non-leap year, rather than $7,000 when a strict per annum interest rate is applied.
{¶ 4} Ely brought suit claiming damages resulting from this discrepancy. On October 14, 2008, FirstMerit filed a motion to dismiss Ely's claims arguing that the contract terms were not incongruous and that the second provision allowed it to charge interest calculated using the 365/360 method. The trial court agreed and granted FirstMerit's motion on May 19, 2009. Ely then appealed that decision to this court. On January 28, 2010, this court reversed the order granting summary judgment, finding the more specific per annum term conflicted with the later provision essentially setting a higher rate of interest. Ely Ents. v. FirstMerit Bank, N.A., 8th Dist. No. 93345, 2010-Ohio-80, 2010 WL 125960 (“ Ely I ”).
{¶ 5} On remand, Ely moved to certify a class of plaintiffs defined as a
Class comprised of borrowers in Ohio who obtained a commercial loan from FirstMerit and/or its predecessors, and executed promissory notes specifying a “per annum” interest rate and containing the following language (the “365/360 basis” language): “The annual interest rate of this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal is outstanding.”
{¶ 6} The trial court held a hearing on class certification and, on June 27, 2012, determined that Ely satisfied the requirements of Civ.R. 23. The court certified the class according to the definition above. FirstMerit then appealed, assigning five errors:
I. The trial court erred by declining to consider at all the merits, issues, and evidence that are relevant to the Civ.R. 23 requirements.
II. The trial court erred when it found that plaintiff has unambiguously defined a reasonably identifiable class of which plaintiff is a member.
III. The trial court erred when it found that class certification under Civil Rule 23(B)(3) was appropriate.
IV. The trial court erred when it found that plaintiff met the commonality, typicality, and adequacy requirements for class certification under Civil Rule 23(A).
V. The trial court erred in finding that Ely had met its burden to satisfy the requirements of Civ.R. 23, and in granting Ely's motion for class certification.
{¶ 7} FirstMerit's fifth assignment of error, its broadest, will be addressed first. There, FirstMerit generally attacks the trial court's decision to certify the class claiming Ely did not meet the requirements of Civ.R. 23.
{¶ 8} In Baughman v. State Farm Mut. Auto. Ins. Co., 88 Ohio St.3d 480, 727 N.E.2d 1265 (2002), the Ohio Supreme Court reaffirmed that the standard of review to be applied for a class action certification case is that of an abuse of discretion. A trial court possesses broad discretion in determining whether a class action may be maintained. That determination will not be disturbed absent a showing that the trial court's attitude was unreasonable, arbitrary, or unconscionable. Beder v. Cleveland Browns, Inc., 129 Ohio App.3d 188, 717 N.E.2d 716 (8th Dist.1998). The trial court's decision regarding the certification of a class should not be reversed on appeal because the appellate judges would have decided the issue differently had the initial determination been in their hands. Hamilton v. Ohio Sav. Bank, 82 Ohio St.3d 67, 694 N.E.2d 442 (1998).
{¶ 9} Class certification in Ohio is based on Rule 23 of the Ohio Rules of Civil Procedure, which is identical to Rule 23 of the Federal Rules of Civil Procedure. In Warner v. Waste Mgt., Inc., 36 Ohio St.3d 91, 521 N.E.2d 1091 (1988), the Ohio Supreme Court set forth seven elements for a class to be certified.
{¶ 10} In determining whether a class action is properly certified, the first step is to ascertain whether the threshold requirements of Civ.R. 23(A) have been met. Once those requirements are established, the trial court must turn to Civ.R. 23(B) to discern whether the purported class comports with the factors specified therein. Accordingly, before a class may be certified as a class action, a trial court must make seven affirmative findings. Id. at paragraph one of the syllabus.
{¶ 11} Five prerequisites are explicitly set forth in Civ.R. 23, while two prerequisites are implicit. Id. The two implicit prerequisites are: (1) the class must be identifiable and unambiguously defined, and (2) the class representatives must be members of the class. Id. at 96, 521 N.E.2d 1091. The four delineated prerequisites in Civ.R. 23(A) include the following:
(3) the claims or defenses of the representative parties are typical of the claims and defenses of the class, and
(4) the representative parties will fairly and adequately protect the interests of the class.
Id. at 97, 521 N.E.2d 1091, quoting Civ.R. 23(A).
{¶ 12} Finally, the trial court must also find that one of the three Civ.R. 23(B) requirements is met before the class may be certified. Warner at 94, 521 N.E.2d 1091;see also Hamilton, 82 Ohio St.3d at 71, 694 N.E.2d 442. If the class movant fails to meet one of these requirements, class certification must be denied.
{¶ 13} This case is complicated by an intervening decision by the Ohio Supreme Court. In Ely I, this court reversed the trial court's grant of FirstMerit's motion to dismiss finding the two interest provisions could be in conflict and could be ambiguous. This court faced a similar appeal in JNT Props., L.L.C. v. KeyBank N.A., 8th Dist. No. 95822, 2011-Ohio-3260, 2011 WL 2566510 (“ JNT Props. I ”). There, we also held that two similar paragraphs setting forth the interest rate were in conflict and reversed the lower court's grant of summary judgment. The Ohio Supreme Court accepted KeyBank's appeal in JNT Props. I. It has since reversed this court's decision, finding no conflict between the two paragraphs in the loan documents involved in JNT Props. I.JNT Props., L.L.C. v. KeyBank N.A., 134 Ohio St.3d 209, 2012-Ohio-5369, 981 N.E.2d 804 (“ JNT Props. II ”). The language is substantially similar in these two cases.1 This implicates doctrines of law of the case and retroactivity. The law of this case, as set forth in Ely I, is that the paragraphs may conflict to create an ambiguity and the complaint is well-pled. However, a superior court has handed down an intervening decision eliminating Ely's chance of success at trial.
{¶ 14} Sometimes, federal appellate courts remand a cause for the application of recent cases handed down by the Supreme Court that impact the ultimate issues involved. Wasby, Court of Appeals Dynamics in the Aftermath of a Supreme Court Ruling, 42 Golden Gate U.L.Rev. 5 (2011). However, this court does not have that luxury. This court must either “affirm, modify, or reverse” a final decision of the trial court. App.R. 12(A).
{¶ 15} Addressing plain error analysis in criminal appeals, the Supreme Court recently reiterated that
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