Johnson's Sales Co., Inc. v. Harris
| Decision Date | 28 June 2007 |
| Docket Number | No. 06-1237.,06-1237. |
| Citation | 260 S.W.3d 273,370 Ark. 387 |
| Parties | JOHNSON'S SALES COMPANY, INC., Kent Johnson's Warehouse Showroom, Inc., Johnson's Warehouse Showroom, Inc., and Best Buy Home Furnishings, Inc., Appellants, v. Wanda HARRIS, on Behalf of Herself and those Similarly Situated, and Decorrien Flemming, Appellees. |
| Court | Arkansas Supreme Court |
Eugene D. Bramblett, Camden, AR, for appellants.
Allen Law Firm, by: H. William Allen and Christian Harris, Little Rock, AR, for appellee Wanda Harris and those similarly situated.
Appellants Johnson's Sales Company, Inc., Kent Johnson's Warehouse Showroom, Inc., Johnson's Warehouse Showroom, Inc., and Best Buy Home Furnishings, Inc. (collectively "Johnson's"), appeal from the Hempstead County Circuit Court's order granting class certification under Ark. R. Civ. P. 23. On appeal, Johnson's raises three arguments for reversal: the circuit court abused its discretion in finding that the elements of (1) commonality, (2) predominance, and (3) superiority supported class certification. Because this is an interlocutory appeal pursuant to Ark. R.App. P.-Civ. 2(a)(9), our jurisdiction is proper under Ark. Sup. Ct. R. 1-2(a)(8). We find no error and affirm.
Appellees Wanda Harris and Decorrien Flemming (collectively "Harris"), as individuals who entered into and held purchase agreements with Johnson's retail stores to purchase furniture through periodic payments, filed a class-action complaint against Johnson's.1 Specifically, Harris claimed that, under the purchase agreements, Johnson's charged an interest rate in excess of that allowed by article 19, section 13 of the Arkansas Constitution. Harris further alleged that class certification was proper because Johnson's eight retail stores also charged other customers usurious rates during the same time period.2
On May 21, 2004, and July 29, 2004, hearings were held on the issue of class certification. After full consideration of all the evidence, briefs, and arguments submitted in support of and in opposition of the motion for class certification, the circuit court granted class certification and entered specific findings of fact and conclusions of law respecting class certification. Furthermore, the circuit court defined the class as follows:
All persons who entered into or held purchase agreements with eight (8) retail stores owned by Defendants to finance goods through periodic payments from July 24, 1997, to present and whose purchase agreements state on their face an "Annual Percentage Rate" in excess of the Discount Rate on 90-Day Commercial Paper as promulgated by the Federal Reserve Bank in St. Louis, Missouri, in effect on the date that their purchase agreements were signed.
On appeal, both parties and the circuit court have stipulated that the proposed class was intended to state:
All persons who entered into or held purchase agreements with eight (8) retail stores owned by Defendants to finance goods through periodic payments from July 24, 1997, to present and whose purchase agreements state on their face an "Annul Percentage Rate" in excess of five percent (5%) per annum above the Discount Rate on 90-Day Commercial Paper as promulgated by the Federal Reserve Bank in St. Louis, Missouri, in effect on the date that their purchase agreements were signed. [Emphasis supplied.]
On appeal, Johnson's argues that the circuit court erred in certifying the underlying case as a class action. Specifically, it asserts that the circuit court abused its discretion in finding that the Rule 23 requirements of (1) commonality, (2) predominance, and (3) superiority were met.
Circuit courts are given broad discretion in matters regarding class certification and we will not reverse a circuit court's decision to grant or deny class certification absent an abuse of discretion. Beverly Enters.-Ark., Inc. v. Thomas, 370 Ark. 310, 259 S.W.3d 445 (2007). When reviewing a circuit court's class-certification order, this court reviews the evidence contained in the record to determine whether it supports the circuit court's decision. Id. This court does not delve into the merits of the underlying claims at this stage, as the issue of whether to certify a class is not determined by whether the plaintiff has stated a cause of action for the proposed class that will prevail. Id.
Rule 23 provides the requirements for class certification. Specifically, the following six requirements must be met before a lawsuit can be certified as a class action under Rule 23:(1) numerosity; (2) commonality; (3) typicality; (4) adequacy; (5) predominance; and (6) superiority. See Beverly, 370 Ark. 310, 259 S.W.3d 445. As stated above, Johnson's is only challenging the circuit court's ruling as to three of these criteria: commonality, predominance, and superiority.
Rule 23(a)(2) requires the circuit court to make a determination that "there are questions of law or fact common to the class." Ark. R. Civ. P. 23(a)(2). This court's case law establishes that this requirement be case specific. See Van Buren Sch. Dist. v. Jones, 365 Ark. 610, 232 S.W.3d 444 (2006). Rule 23(a)(2) does not require that all questions of law or fact be common, but rather the standard is that there need be only a single issue common to all members of the class. Id. Moreover, when the party opposing the class has engaged in some course of conduct that affects a group of persons and gives rise to a cause of action, one or more of the elements of that cause of action will be common to all of the persons affected. Id.
Here, the class is defined as all persons who entered into or held purchase agreements with Johnson's and whose purchase agreements state on their face an Annual Percentage Rate (APR) in excess of five percent per annum above the discount rate on 90-day commercial paper. Thus, there clearly is a common usury claim that runs amongst all class members. Consequently, the circuit court did not abuse its discretion in finding that the commonality element was satisfied.
Furthermore, Johnson's argument that the threshold question of whether or not a prospective class member actually paid interest in excess of the maximum lawful rate cannot be answered by the common questions of law or fact found by the circuit court is without merit. This argument fails for two reasons. First, Johnson's has not challenged the class definition and the class definition is very clear that class members are individuals who have entered into purchase agreements that, on their face, contain an APR in excess of five percent above the discount rate.3 Second, just as the circuit court determined, Johnson's argument would require this court to go to the merits of the case and this is simply not proper in determining if class certification was proper. See Beverly, 370 Ark. 310, 259 S.W.3d 445. Therefore, the circuit court did not abuse its discretion in finding that the element of commonality supported class certification.
Rule 23(b) requires that "the questions of law or fact common to the members of the class predominate over any questions affecting only individual members[.]" Ark. R. Civ. P. 23(b). This court has explained that the starting point in examining the predominance issue is whether a common wrong has been alleged against the defendant. See Beverly, 370 Ark. 310, 259 S.W.3d 445. If a case involves preliminary, common issues of liability and wrongdoing that affect all class members, the predominance requirement of Rule 23 is satisfied even if the circuit court must subsequently determine individual damage issues in bifurcated proceedings. Id. Moreover, this court has recognized that a bifurcated process of certifying a class to resolve preliminary, common issues and then decertifying the class to resolve individual issues, such as damages, is consistent with Rule 23. Id. Moreover, this court has repeatedly stated:
[t]he predominance element can be satisfied if the preliminary, common issues may be resolved before any individual issues. In making this determination, we do not merely compare the number of individual versus common claims. Instead, we must decide if the issues common to all plaintiffs "predominate over" the individual issues, which can be resolved during the decertified stage of bifurcated proceedings.
Id. at 317, 259 S.W.3d at ___. See also Van Buren, 365 Ark. 610, 232 S.W.3d 444. Thus, the question is whether there are overarching issues that can be addressed before resolving individual issues. Beverly, 370 Ark. 310, 259 S.W.3d 445. However, if preliminary issues are individualized, then the predominance requirement is not satisfied. See id. Indeed, a case that presents numerous individual issues regarding the defendants' conduct, causation, injury, and damages will best be resolved on a case-by-case basis. Id.
In the present case, as stated above, a common wrong — the usury claim — is alleged against Johnson's. Johnson's claims that predominance cannot be met because the usury question for each prospective class member will require the court to examine the payment history of each customer to determine the actual interest rate at which he repaid his loan. This argument is flawed.
First, as this court has explained, if a case involves preliminary, common issues of liability and wrongdoing that affect all class members, the predominance requirement is satisfied even if the circuit court must subsequently determine individual damage issues in bifurcated proceedings. See id. Here, there is clearly an overlying common wrong alleged against Johnson's. Second, the fact that Johnson's may bring affirmative defenses and counterclaims against individual members of the class does not disqualify the case from certification. The predominance element can be satisfied if the preliminary, common issues may be resolved before individual issues, and the question is whether this is an overarching issue that can be addressed before resolving...
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