Knudsen v. Univ. of Mont.

• Decision Date: 30 July 2019
• Docket Number: DA 18-0552
• Citation: 445 P.3d 834,2019 MT 175,396 Mont. 443
• Parties: Daniel P. KNUDSEN, Rose E. Ayers, Eric Dennison, Lance French, Erik Farnham and Kaila Jacobson, Plaintiffs and Appellees, v. The UNIVERSITY OF MONTANA, a unit of the Montana University System, Defendant and Appellant.
• Court: Montana Supreme Court

396 Mont. 443

445 P.3d 834

2019 MT 175

Daniel P. KNUDSEN, Rose E. Ayers, Eric Dennison, Lance French, Erik Farnham and Kaila Jacobson, Plaintiffs and Appellees,

v.The UNIVERSITY OF MONTANA, a unit of the Montana University System, Defendant and Appellant.

DA 18-0552

Supreme Court of Montana.

Submitted on Briefs: May 1, 2019

Decided: July 30, 2019

For Appellant: Maxon R. Davis, Davis, Hatley, Haffeman & Tighe, P.C., Great Falls, Montana, Lucy T. France, University of Montana Office of Legal Counsel, Missoula, Montana, Christopher D. Abbott, Assistant Attorney General, Agency Legal Services Bureau, Helena, Montana

For Appellees: John L. Amsden, Justin P. Stalpes, Michael G. Black, Beck, Amsden & Stalpes, Bozeman, Montana, Quentin M. Rhoades, Nicole L. Siefert, Rhoades, Siefert & Erickson, Missoula, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 The University of Montana (the "University") appeals orders from the Fourth Judicial District Court, Missoula County, certifying three classes to proceed in a lawsuit against the University. The suit alleges that the University breached its fiduciary duty to students by entering into a contract with Higher One, Inc., to process student loan refunds through non-competitive financial accounts and by providing students’ personal information to Higher One. On appeal, we review whether the District Court abused its discretion when it certified three classes under M. R. Civ. P. 23(b) to pursue the claims. We reverse in part and affirm in part.

PROCEDURAL AND FACTUAL BACKGROUND

¶2 Prior to 2010, the University processed student loan disbursements by issuing paper checks to each student receiving a reimbursement. That year, the University entered into a service agreement with Higher One to process student loan disbursements to enrolled students. Under the contract, Higher One disbursed the student loan funds. Students receiving student loan reimbursements were given the option to have the funds directly deposited into an account with Higher One or electronically transferred into a third-party bank account of the student’s choosing. If a student did not select one of those two options, Higher One issued the student a paper check by default. The contract expired on June 30, 2015, and was not renewed.

¶3 The University transferred to Higher One the following personal information regarding more than 38,000 students: the student’s name, address, e-mail address, University ID number, birthdate, gender, telephone number, and the last four digits of the student’s social security number. Higher One sent each student a debit card branded with the University’s logo, along with information directing the students to a Higher One website to select the method for their loan disbursement. If students selected the "Easy Refund" method, Higher One opened an account—called a OneAccount—for the student with its partner bank and activated the debit card. Students also could select to have the funds electronically transferred to a bank account of their choosing, but a student who selected this option was directed to fill out a separate paper form and send it to Higher One to complete the transfer. Students who did not select an option on the website were sent a paper check to the mailing address on file.

¶4 The fee schedule that would be charged to students selecting to open OneAccounts was attached as Exhibit B to the University’s contract with Higher One. Fees included a $0.50 fee for each debit card transaction, fees for use of Non-Higher One ATMs, fees for insufficient funds, and abandoned account fees. The fee schedule was available to students through Higher One’s website.

¶5 Current and former students Daniel P. Knudsen, Rose E. Ayers, Eric Dennison, Lance French, Erik Farnham, and Kaila Jacobson (collectively, "Students") filed this lawsuit against the University in November 2016 as a class action complaint. The Students alleged that the University’s agreement with Higher One subjected them to excessive bank fees and that the University disclosed personal information to Higher One without their consent. The Students alleged breach of the University’s fiduciary duty, negligent entrustment, statutory and constitutional privacy right violations, and unjust enrichment. The complaint sought compensatory damages, as well as declaratory and injunctive relief. In two orders, the District Court certified three classes to proceed in the lawsuit:

Class 1: Past or present students of Defendant University who paid fees to Higher One Holdings, as a consequence of opening an account with Higher One to receive student loan refunds.

Class 2: Past or present students of Defendant University whose personal information was transmitted to Higher One Holdings.

Class 3: Past or present students of Defendant University whose personal information has been or may be transmitted to a third-party vendor or third-party contractor without prior written consent in circumstances other than where transmission is necessary for completion of a task having a legitimate educational interest.

The University appeals the Order Granting Motion for Certification of Classes and the Supplemental Order Granting Motion for Certification of Classes.

STANDARD OF REVIEW

¶6 We review a district court’s decision on a motion for class certification for an abuse of discretion. Sangwin v. State , 2013 MT 373, ¶ 10, 373 Mont. 131, 315 P.3d 279.

DISCUSSION

¶7 A "class action is ‘an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.’ " Mattson v. Mont. Power Co. , 2012 MT 318, ¶ 18, 368 Mont. 1, 291 P.3d 1209 (quoting Califano v. Yamasaki , 442 U.S. 682, 700-01, 99 S. Ct. 2545, 2557, 61 L.Ed.2d 176 (1979) ). "A class action allows the representative party to conserve the judiciary’s and the similarly-situated parties’ resources by permitting the single litigation of common issues of fact and law." Roose v. Lincoln Cty. Emp. Grp. Health Plan , 2015 MT 324, ¶ 14, 381 Mont. 409, 362 P.3d 40. In order for a class action to proceed, it must meet the four requirements of Rule 23(a) and it must satisfy at least one of the three subsections of Rule 23(b). Roose , ¶ 14. The University does not dispute that the Students meet the four requirements of Rule 23(a). It challenges only whether the District Court abused its discretion in determining that the classes satisfied the standards for a class action under Rule 23(b)(1), (2), or (3).

¶8 Rule 23(b) describes three avenues under which a class action may proceed:

A class action may be maintained if Rule 23(a) is satisfied and if:

(1) Prosecuting separate actions by or against individual class members would create a risk of:

(A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or

(B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests;

(2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or

(3) the court finds that the questions of law or fact common to the 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. The matters pertinent to the findings include:

(A) the class members’ interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members;

(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and

(D) the likely difficulties in managing a class action.

¶9 The District Court’s initial order, certifying two classes, provided no analysis under Rule 23(b). It provided the bare statement, "The court believes that classes described by Rule 23(b)(1) and (3) apply." In its supplemental order, certifying a third class, the District Court provided brief analysis of Rule 23(b), without clearly specifying under what subsection it certified each of the three classes. On appeal, the University argues that the District Court erred in certifying the three classes under any subsection of Rule 23(b). Students respond that Class 3 is properly certified under Rule 23(b)(2) and that Class 1 and Class 2 are properly certified under Rule 23(b)(3).

¶10 " ‘[W]hen a district court’s decision is not supported by findings as to the applicability of Rule 23 criteria, it is not entitled to the traditional deference’ given to determinations of class status." Mattson , ¶ 17 (quoting Local Joint Exec. Bd. of Culinary/Bartender Tr. Fund v. Las Vegas Sands, Inc. , 244 F.3d 1152, 1161 (9th Cir. 2001) ). When "the factual record is sufficiently well developed that we may evaluate for ourselves whether the provisions of Rule 23 have been satisfied," however, we can do such an evaluation and "do not need to remand for a determination of class action status." Local Joint Exec. Bd. of Culinary/Bartender Tr. Fund , 244 F.3d at 1161. Notwithstanding the District Court’s minimal analysis certifying the three classes, we conclude that the factual record is sufficiently well-developed for us to conduct our own evaluation. We discuss each subsection of Rule 23(b) in turn.

Rule 23(b)(1)

¶11 Rule 23(b)(1) is a narrow basis for class actions that applies only when individual adjudications threaten to create "incompatible standards" for the opposing party’s conduct or when there are limited funds available for recovery. See M. R. Civ. P. 23(b)(1)(A)-(B) ; see also 2 William B....