IBM Corp. v. Kemp

• Decision Date: 27 June 2000
• Docket Number: No. A00A0233.,A00A0233.
• Citation: 244 Ga. App. 638,536 S.E.2d 303
• Parties: INTERNATIONAL BUSINESS MACHINES CORPORATION v. KEMP et al.
• Court: Georgia Court of Appeals

536 S.E.2d 303

244 Ga. App. 638

INTERNATIONAL BUSINESS MACHINES CORPORATION v. KEMP et al.

No. A00A0233.

Court of Appeals of Georgia.

June 27, 2000.

Powell, Goldstein, Frazer & Murphy, John F. Wymer III, Jacqueline E. Kalk, Atlanta, for appellant.

Browning & Tanksley, Jerry A. Landers, Jr., Marietta, Hull, Towill, Norman, Barrett & Salley, David E. Hudson, William F. Hammond, Augusta, for appellees. BLACKBURN, Presiding Judge.

International Business Machines Corporation (IBM) appeals from the trial court's grant of Barbara J. Kemp, Maria G. Wilson and Roger Wilson's (plaintiffs) motion for class certification. IBM contends that the trial court erred by: (1) holding that New York law governs the fraud claim of all potential class members; (2) holding that New York law governs the contract claim of all potential class members; (3) granting class certification where the claims lack commonality; and (4) granting class certification prior to determining whether plaintiffs' claims were preempted by federal law. Because the trial court based its grant of class certification on erroneous determinations of the law governing potential class members' claims, we reverse in part, vacate in part and remand the case.

THE FACTS

IBM is headquartered in New York and has offices and employees in all 50 states and the District of Columbia. Plaintiffs, two former employees of IBM and the spouse of a former employee, are or were residents of Georgia. In late 1991 and early 1992, IBM offered to its employees certain early leave or retirement benefits in a program known as ITO-II. The program was "intended to help IBM become more competitive and efficient by reducing its work force and to assist employees who choose to participate in the program in making the transition into a new career or retirement." Employees who took part in ITO-II continued to be eligible for a pre-existing program for employees and their spouses, the "Retirement Education Assistance Program" (REAP). REAP offered reimbursement of up to a total of $2,500 each per employee and spouse for a course of study or training taken within three years after retirement. Subsequently, in December 1992, IBM suspended REAP benefits.

In December 1994, plaintiffs filed a complaint asserting causes of action for fraud and breach of contract. Plaintiffs allege that they were defrauded when IBM canceled REAP benefits after they took early leave or early retirement. Plaintiffs further allege that the REAP benefits were promised by IBM as part of the incentive for early leave or retirement and that IBM breached that promise when it canceled REAP. IBM denies that canceling REAP breached the ITOII agreement.

The issue before this court concerns plaintiffs' motion for class certification. The proposed class would consist of those former IBM employees who participated in ITO-II and their spouses, who did not receive full REAP benefits due to its suspension. Proposed class members are residents of Alabama, California, Colorado, Florida, Georgia, Illinois, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington, Wisconsin and the District of Columbia.

The trial court granted class certification, finding that the requirements of the class action statute, OCGA § 9-11-23, were met. Specifically, the trial court determined that the number of potential class members satisfied the numerosity requirement; that plaintiffs were adequate representatives of the class; that the superiority requirement was satisfied and that, because New York law would uniformly apply to the claims of all potential class members, the commonality requirement was met.

1. On appeal, IBM contends the trial court erred by granting class certification because New York law does not uniformly apply to all potential plaintiffs' claims and, as a result, the commonality requirement is not met. We will analyze the conflict of laws for the tort claim and the contract claim in turn.

CONFLICT OF LAWS ANALYSIS

(a) IBM contends that the trial court erred by determining that New York law applied to fraud claims of all potential class members. We agree. The trial court properly determined that, for tort claims generally, Georgia applies the choice of law doctrine lex loci delictis. The trial court misapplied the doctrine of lex loci delictis to this case which involves a transitory tort. It is undisputed that the alleged fraud is of a transitory nature.

Under the rule of lex loci delictis, tort cases are generally governed by the substantive law of the place where the tort or wrong occurred. In torts of a transitory nature, the place of the wrong is the place where the last event occurred necessary to make an actor liable for the alleged tort.¹ Wardell v. Richmond Screw Anchor Co., 133 Ga.App. 378, 380, 210 S.E.2d 854 (1974); Risdon Enterprises v. Colemill Enterprises, 172 Ga.App. 902, 903-904, 324 S.E.2d 738 (1984). As to the fraud claim, the substantive law will be governed by the state where the "last event" occurred.

The trial court ruled that New York law applied based on its determination that the last event necessary to establish liability for fraud was the decision to suspend REAP benefits, which occurred in New York. The decision to suspend REAP benefits was not, however, the last act necessary to establish liability for fraud. The elements of fraud are: "a false representation by a defendant, scienter, intention to induce the plaintiff to act or refrain from acting, justifiable reliance by plaintiff, and damage to plaintiff." Crawford v. Williams, 258 Ga. 806, 375 S.E.2d 223 (1989). Only fraud which results in damage is actionable. OCGA § 51-6-1. Thus, the "last event" necessary to make an actor liable for fraud is the injury, and consequently, for purposes of lex loci delictis, the place of the wrong is where that injury is sustained. This doctrine has been so applied in other jurisdictions. See Mgmt. Science America v. NCR Corp., 765 F.Supp. 738 (N.D.Ga.1991) (fraud committed in state where economic loss occurred); Steele v. Ellis, 961 F.Supp. 1458, 1463 (D.Kan.1997) (applying Kansas law, the last event is the injury and the place of the wrong is where the loss is sustained); Glass v. Southern Wrecker Sales, 990 F.Supp. 1344, 1347 (M.D.Ala.1998) (same result when applying lex loci delictis under Alabama law); Restatement of Conflicts of Laws, § 377 (1934).

Potential class members here did not suffer injury at the moment IBM decided to suspend benefits, as plaintiffs urge. A former employee or spouse was not...