Frost v. Mazda Motor of America, Inc., No. 582PA99.

• Decision Date: 21 December 2000
• Docket Number: No. 582PA99.
• Citation: 540 S.E.2d 324,353 N.C. 188
• Parties: John Brent FROST and Carolyn Frost and Persons Similarly Situated, v. MAZDA MOTOR OF AMERICA, INC.; Mazda Motors of America (East), Inc.; Primus Automotive Financial Services, Inc. d/b/a Mazda American Credit; Al Smith Buick Co., Inc., a North Carolina corporation d/b/a Al Smith Buick Dodge Mazda; Automobiles of Asheboro, Inc., a North Carolina corporation d/b/a Asheboro Honda Mazda; Bob King, Inc., a North Carolina corporation d/b/a Bob King Mazda Kia; Burlington Lincoln-Mercury Leasing Corporation, a North Carolina corporation d/b/a Burlington Lincoln Mercury/Bill Ingold Mazda; City Motors, Inc., a North Carolina corporation t/a City Motors; Charles Fisher, Inc., a North Carolina corporation d/b/a Fisher Mazda; Frema Motors, Inc., a North Carolina corporation t/a Frema Motors; Grant Buick, Inc., a North Carolina corporation t/a Grant Buick Mazda; Dieffenbach Chevrolet-Buick, Inc., a North Carolina corporation d/b/a Hank Dieffenbach Mazda; Hendrick Management Corporation, a North Carolina corporation d/b/a Hendrick Mazda; Holiday Cars, Inc., a North Carolina corporation d/b/a Holiday Chrysler Plymouth Mazda; Howell Buick, Inc., a North Carolina corporation d/b/a Howell Buick Mazda; Sports and Imports of Hickory, Inc., a North Carolina corporation d/b/a Roberts Mazda Mitsubishi or Sports and Imports, Inc.; a North Carolina corporation d/b/a Roberts Mazda; Sky Country Nissan, Inc., a North Carolina corporation d/b/a Sky Country Nissan Mazda; Sonny Hancock Chevrolet, Inc., a North Carolina corporation d/b/a Sonny Hancock Mazda; HMMC, Inc., a North Carolina corporation d/b/a Vester Honda, Vester Mazda of Wilson and Vester Honda-Mazda; Cabarrus Auto Investors Company, a North Carolina Limited Partnership, d/b/a Mazda of Concord; Alcoke Auto Center LLC, a North Carolina corporation d/b/a New Bern Pontiac Mazda; Salisbury Lincoln-Mercury, Inc., a North Carolina corporation d/b/a Salisbury Lincoln Mercury Mazda; C & S Motor Company, Inc., a North Carolina corporation d/b/a Loughlin Automotives; Louis F. Harrelson, Inc., a North Carolina corporation d/b/a Harrelson Mazda; Charles Montgomery Motors, Inc., a North Carolina corporation d/b/a Montgomery Mazda; Parks Automotive, Inc., a North Carolina corporation d/b/a Parks Mazda; W.R. Williamson, Inc., a North Carolina corporation d/b/a Williamson Mazda.
• Court: North Carolina Supreme Court

540 S.E.2d 324

353 N.C. 188

John Brent FROST and Carolyn Frost and Persons Similarly Situated, v. MAZDA MOTOR OF AMERICA, INC.; Mazda Motors of America (East), Inc.; Primus Automotive Financial Services, Inc. d/b/a Mazda American Credit; Al Smith Buick Co., Inc., a North Carolina corporation d/b/a Al Smith Buick Dodge Mazda; Automobiles of Asheboro, Inc., a North Carolina corporation d/b/a Asheboro Honda Mazda; Bob King, Inc., a North Carolina corporation d/b/a Bob King Mazda Kia; Burlington Lincoln-Mercury Leasing Corporation, a North Carolina corporation d/b/a Burlington Lincoln Mercury/Bill Ingold Mazda; City Motors, Inc., a North Carolina corporation t/a City Motors; Charles Fisher, Inc., a North Carolina corporation d/b/a Fisher Mazda; Frema Motors, Inc., a North Carolina corporation t/a Frema Motors; Grant Buick, Inc., a North Carolina corporation t/a Grant Buick Mazda; Dieffenbach Chevrolet-Buick, Inc., a North Carolina corporation d/b/a Hank Dieffenbach Mazda; Hendrick Management Corporation, a North Carolina corporation d/b/a Hendrick Mazda; Holiday Cars, Inc., a North Carolina corporation d/b/a Holiday Chrysler Plymouth Mazda; Howell Buick, Inc., a North Carolina corporation d/b/a Howell Buick Mazda; Sports and Imports of Hickory, Inc., a North Carolina corporation d/b/a Roberts Mazda Mitsubishi or Sports and Imports, Inc.; a North Carolina corporation d/b/a Roberts Mazda; Sky Country Nissan, Inc., a North Carolina corporation d/b/a Sky Country Nissan Mazda; Sonny Hancock Chevrolet, Inc., a North Carolina corporation d/b/a Sonny Hancock Mazda; HMMC, Inc., a North Carolina corporation d/b/a Vester Honda, Vester Mazda of Wilson and Vester Honda-Mazda; Cabarrus Auto Investors Company, a North Carolina Limited Partnership, d/b/a Mazda of Concord; Alcoke Auto Center LLC, a North Carolina corporation d/b/a New Bern Pontiac Mazda; Salisbury Lincoln-Mercury, Inc., a North Carolina corporation d/b/a Salisbury Lincoln Mercury Mazda; C & S Motor Company, Inc., a North Carolina corporation d/b/a Loughlin Automotives; Louis F. Harrelson, Inc., a North Carolina corporation d/b/a Harrelson Mazda; Charles Montgomery Motors, Inc., a North Carolina corporation d/b/a Montgomery Mazda; Parks Automotive, Inc., a North Carolina corporation d/b/a Parks Mazda; W.R. Williamson, Inc., a North Carolina corporation d/b/a Williamson Mazda.

No. 582PA99.

Supreme Court of North Carolina.

December 21, 2000.

Wilson & Iseman, L.L.P., by Urs R. Gsteiger, Winston-Salem, for plaintiff-appellees.

Poyner & Spruill, L.L.P., by David M. Barnes, Raleigh; and Sutherland Asbill & Brennan LLP, by Thomas M. Byrne, pro hac vice, Atlanta, GA, for defendant-appellant Primus Automotive Financial Services, Inc.

FREEMAN, Justice.

This is a class action lawsuit brought by named plaintiffs to recover a $158.50 fee charged by the Mazda dealership when plaintiffs exercised their option to buy their leased vehicle. Plaintiffs' lease agreement with the dealer (on a "Mazda American Credit" form) failed to disclose that any such fee would be charged in addition to the purchase-option price stated in the agreement.¹ The fee nevertheless appeared in a space designated "DEL. & HDLG." on the dealer's "Retail Buyer[`]s Order and Invoice" executed by plaintiffs when they purchased the vehicle.

On 27 March 1998, plaintiffs filed an amended class action complaint against their Mazda dealer and, on behalf of all other lessee-purchasers of Mazda vehicles similarly situated between 1994 and 1998, against every Mazda dealer in North Carolina, two North American manufacturers of Mazdas, and PRIMUS (d/b/a Mazda American Credit). PRIMUS is a finance company that takes assignment of the lease from the dealer, buys the leased vehicle, and collects payments from the lessee. If the lessee ultimately chooses to buy the vehicle, PRIMUS sells the car back to the dealer, which then sells it to the lessee. Plaintiffs alleged their experience supported claims against all defendants of breach of contract, negligent misrepresentation, breach of warranty, fraud, and "unfair and deceptive trade practices." They further alleged that defendants' acts and omissions, made knowingly or with willful and wanton disregard for plaintiffs' rights, supported an award of punitive damages.

The dealership defendants filed a motion to dismiss, which was granted to all but Bob King Mazda, the dealership from which plaintiffs leased, then purchased, their vehicle. Plaintiffs' claims against PRIMUS and the Mazda manufacturers remained extant.

Plaintiffs filed a notice of appeal of the dismissal, which they subsequently withdrew pursuant to a settlement agreement with all defendant dealerships, including Bob King Mazda. In accordance with the agreement's terms, plaintiffs also dismissed all claims against all dealership defendants.

This agreement was approved by a court order, which noted that the settlement included the dealerships' agreement to "pay plaintiffs' counsel the amount of $34,300.00 as reimbursement for part of the costs and attorneys' fees associated with the prosecution of this matter." In addition, in reciting plaintiffs' agreement to execute a tortfeasors' release of all (and only) the dealership defendants, the court stated it "makes no finding as to the adequacy or inadequacy of the Frosts as class representatives [and] makes no finding as to the legal effect of said release."

On 19 May 1999, the trial court granted plaintiffs' motion for class certification. The court found, inter alia, that a class of plaintiffs existed with an interest in the same issues of law and fact, including whether charging monies in addition to the purchase-option price plus taxes breached the lease, was an "unfair and deceptive practice" under chapter 75-1.1 of the North Carolina General Statutes, was fraudulent, and was sufficiently aggravated as to warrant the imposition of punitive damages. The court found that named plaintiffs would "fairly and adequately insure the representation of the interests of all class members," that "[t]here is no conflict of interest between the named plaintiffs and the class members," and that "named plaintiffs have a genuine personal interest in the outcome of the action." As to defendant PRIMUS, the court specifically found:

As part of the relief granted for plaintiffs' motion to compel, defendant PRIMUS has been ordered to list the name, address, and telephone number of all persons who are potential class members; to wit: those persons who entered a net closed[-]end lease with PRIMUS doing business as Mazda American Credit which contained a purchase option similar to that in the representative plaintiffs' lease and were charged monies in addition to the purchase[-]option price plus taxes when they exercised their option to purchase. This information is uniquely within defendant PRIMUS' control but defendant PRIMUS withheld this information without objection and despite the fact that the parties had entered a consent confidentiality order. Under the circumstances the court finds it just and proper that defendant PRIMUS send the notice approved by the court to potential class members.

The court accordingly ordered PRIMUS to send the approved notice of the pending class action "to all potential class members by First Class United States Mail." The same day, the court entered an order on plaintiffs' motion to compel against PRIMUS, directing PRIMUS to answer designated interrogatories and produce certain named documents, but specifically deferring a ruling on plaintiffs' request for sanctions.

The Court of Appeals granted plaintiffs' motion to dismiss defendant PRIMUS' interlocutory appeal of the class certification order and dismissed as moot PRIMUS' petition for writ of certiorari. This Court granted PRIMUS' petitions for writs of certiorari and supersedeas, seeking a stay of the trial court's orders and review of the class certification order and the question whether under the circumstances of this case the order is immediately appealable.

A class certification order is not a final judgment disposing of the cause as to all parties; the appeal of such orders is thus interlocutory. See, e.g., Perry v. Cullipher, 69 N.C.App. 761, 318 S.E.2d 354 (1984) (court order denying class certification does not determine the controversy and is interlocutory). There is no right of immediate appeal from an interlocutory order, e.g., Travco Hotels, Inc. v. Piedmont Natural Gas Co., 332 N.C. 288, 292, 420 S.E.2d 426, 428 (1992); but such appeals are allowed if they involve a matter of law or legal inference that affects a substantial right of the appellant, N.C.G.S. §§ 1-277(a) (1999), 7A-27(d)(1); e.g., Wachovia Realty Invs. v. Housing, Inc., 292 N.C. 93, 232 S.E.2d 667 (1977) (interlocutory order is appealable if it affects a substantial right and will work injury to appellants if not corrected before final judgment).

The "substantial right" test for appealability of interlocutory orders is that "the right itself must be substantial and the deprivation of that ... right must potentially work injury ... if not corrected before appeal from final judgment." Goldston v. American Motors Corp., 326 N.C. 723, 726, 392 S.E.2d 735, 736 (1990), quoted in Travco, 332 N.C. at 292, 420 S.E.2d at 428. The test is more easily stated than applied: "It is usually necessary to resolve the question in each case by considering the particular facts of that case and the procedural context in which the order from which appeal is sought was entered." Waters v. Qualified Personnel, Inc., 294 N.C. 200, 208, 240 S.E.2d 338, 343 (1978).

The denial of class certification has been held to affect a substantial right because it determines the action as to the unnamed plaintiffs. E.g., Perry v. Cullipher, 69 N.C.App. at 762, 318 S.E.2d at 356 (if court errs in refusing to certify class action, named plaintiff may obtain judgment without other class members, but the latter will suffer an injury that...