McMillan v. Blue Ridge Cos.
| Decision Date | 17 December 2021 |
| Docket Number | No. 492A20,492A20 |
| Parties | Elizabeth MCMILLAN and Tiffany Scott v. BLUE RIDGE COMPANIES, INC., Blue Ridge Property Management, LLC, BRC Cross Creek, LLC d/b/a Legacy at Cross Creek, and Fayetteville Cross Creek, LLC d/b/a Legacy at Cross Creek, Inc. |
| Court | North Carolina Supreme Court |
Milberg Coleman Bryson Phillips Grossman, PLLC, by Scott C. Harris, Raleigh, and Patrick M. Wallace; and Edward H. Maginnis, Fayetteville, and Karl S. Gwaltney, Raleigh, for plaintiff-appellees.
Cranfill Sumner, LLP, Raleigh, by Steven A. Bader and Richard T. Boyette, for defendant-appellant Blue Ridge Property Management, LLC.
¶ 1 In this case we consider whether the trial court erred by granting plaintiffs' motion to certify three classes for a class action lawsuit. Plaintiffs Elizabeth McMillan and Tiffany Scott are former tenants of residential apartments in Fayetteville, North Carolina, owned and managed by defendant Blue Ridge Property Management, LLC (Blue Ridge). Plaintiffs brought a class action lawsuit against the defendants alleging violations of N.C.G.S. § 42-46 (North Carolina Residential Rental Agreements Act, or NCRRAA) and N.C.G.S. § 75-50 et seq. (North Carolina Debt Collection Act, or NCDCA). Specifically, they moved the trial court to certify three classes of certain fellow tenants: the "Collection Letter Class," the "Eviction Fee Class," and the "Complaint-Filing Fee Class." On 11 June 2020, the trial court granted plaintiffs' motion to certify all three classes. On 10 July 2020, Blue Ridge appealed the class certification order directly to this Court under N.C.G.S. § 7A-27(a)(4). Because we conclude that the trial court did not abuse its discretion, we affirm and remand for further proceedings.
¶ 2 The NCRRAA, in relevant part, authorizes landlords to assess certain fees against defaulting tenants "only if ... the landlord filed and served a complaint for summary ejectment and/or money owed, the tenant cured the default or claim, and the landlord dismissed the complaint prior to judgment." N.C.G.S. § 42-46(e) (2021). The NCDCA, in relevant part, broadly prohibits debt collectors from engaging in certain unauthorized practices, such as "[f]alsely representing the character, extent, or amount of a debt against a consumer or of its status in any legal proceeding" or "[f]alsely representing that an existing obligation of the consumer may be increased by the addition of [certain] fees." N.C.G.S. § 75-54(4), (6) (2021). Here, plaintiffs allege that Blue Ridge violated these Acts by unduly threatening (via collection letter) and assessing eviction fees and complaint-filing fees against tenants behind on rent before summary ejection complaints had been filed and before summary ejectment proceedings were complete. The merits of these substantive allegations are not at issue here. "In determining the propriety of a class action, the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met." Eisen v. Carlisle & Jacquelin , 417 U.S. 156, 178, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) (cleaned up). The only question before the Court at this stage is whether the classes were properly certified, not whether the plaintiffs' claims will succeed. See id. at 177–78, 94 S.Ct. 2140.
¶ 3 On 16 July 2018, plaintiffs filed a complaint as a putative class action against Blue Ridge and several related entities. Later, plaintiffs voluntarily dismissed the related entities from the suit pursuant to Rule 41(a)(1) of the North Carolina Rules of Civil Procedure. Initially, plaintiffs alleged six claims for relief: (1) violation of N.C.G.S. § 42-46 (NCRRAA) (on behalf of all classes); (2) violation of N.C.G.S. § 42-46 (NCRRAA) (on behalf of the Complaint-Filing Fee Class); (3) violation of N.C.G.S. § 75-50 et seq. (NCDCA) (on behalf of all classes); (4) violation of N.C.G.S. § 75-1.1 et seq. (North Carolina Unfair and Deceptive Trade Practices Act, or UDTPA) (on behalf of all classes); (5) a petition for an injunction pursuant to N.C.G.S. § 1-485 et seq. (); and (6) petition for declaratory judgment pursuant to N.C.G.S. § 1-253 (). On 26 November 2018, Blue Ridge filed its answer, denying liability.
¶ 4 On 8 March 2019, Chief Justice Beasley designated this matter as exceptional pursuant to Rule 2.1 of the General Rules of Practice for the Superior and District Courts, and assigned the matter to Judge Rebecca Holt.
¶ 5 On 15 May 2019, plaintiff Elizabeth McMillan filed a partial motion for judgment on the pleadings. On 20 May 2019, Blue Ridge filed a motion to dismiss plaintiffs' suit pursuant to N.C. R. Civ. P. 12(b)(6). On 18 November 2019, the trial court denied in part and granted in part the motion. In part, the court ruled that the collection of eviction fees and complaint-filing fees violated the NCRRAA, but denied the motion as to Blue Ridge's liability for sending collection letters under the NCDCA, leaving the matter to be tried. Also on 18 November 2019, the trial court denied in part and granted in part Blue Ridge's motion to dismiss. Specifically, the court dismissed claims four and five (UDTPA violation on behalf of all classes and the petition for an injunction on behalf of the Complaint-Filing Fee Class) but left the remaining four claims intact.
¶ 6 On 5 December 2019, Blue Ridge filed a motion for partial summary judgment. On 6 December 2019, plaintiffs filed a motion for partial summary judgment. That same day, plaintiffs filed a motion for class certification. On 11 June 2020, the court denied in part and granted in part plaintiffs' motion for partial summary judgment. Specifically, the court ruled that Blue Ridge violated the NCRRAA and the NCDCA when it assessed eviction fees and complaint-filing fees against plaintiffs, and that the collection letters likewise violated the NCDCA. However, the court found that genuine issues of material fact remain as to whether the collection letters proximately caused actual injury to plaintiffs. Accordingly, the court denied plaintiffs' motion for summary judgment on this issue.
¶ 7 This Court reviews a trial court's class certification order for abuse of discretion. Fisher v. Flue-Cured Tobacco Coop. Stabilization Corp. , 369 N.C. 202, 209, 794 S.E.2d 699 (2016). "[T]he test for abuse of discretion is whether a decision is manifestly unsupported by reason, or so arbitrary that it could not have been the result of a reasoned decision." Frost v. Mazda Motor of Am., Inc. , 353 N.C. 188, 199, 540 S.E.2d 324 (2000) (cleaned up). Within this general standard, when addressing a class certification order, this Court has recognized that conclusions of law are reviewed de novo, and findings of fact are considered binding if supported by competent evidence. Fisher , 369 N.C. at 209, 794 S.E.2d 699.
¶ 8 Rule 23 of the North Carolina Rules of Civil Procedure authorizes class action lawsuits. Specifically, Rule 23 establishes that "[i]f persons constituting a class are so numerous as to make it impracticable to bring them all before the court, such of them, one or more, as will fairly insure the adequate representation of all may, on behalf of all, sue or be sued." N.C.G.S. § 1A-1, Rule 23(a) (2019). "The party seeking to bring a class action under Rule 23(a) has the burden of showing that [certain] prerequisites to utilizing the class action procedure are present." Crow v. Citicorp Acceptance Co. , 319 N.C. 274, 282, 354 S.E.2d 459 (1987) (footnote omitted).
¶ 9 These prerequisites are well established. See, e.g., Faulkenbury v. Tchrs.' & State Emps. Ret. Sys. , 345 N.C. 683, 697, 483 S.E.2d 422 (1997) (); Beroth Oil Co. v. N.C. Dep't of Transp. , 367 N.C. 333, 336–37, 757 S.E.2d 466 (2014) (same); Fisher , 369 N.C. at 209, 794 S.E.2d 699 (same). As an initial matter, the class representatives must demonstrate the existence of a class. Crow , 319 N.C. at 277, 354 S.E.2d 459. "A proper class exists ‘when the named and unnamed members each have an interest in either the same issue of law or of fact, and that issue predominates over issues affecting only individual class members.’ " Fisher , 369 N.C. at 209, 794 S.E.2d 699 (quoting Crow , 319 N.C. at 280, 354 S.E.2d 459 ).
¶ 10 In addition to this threshold requirement, "the class representatives must show: (1) that they will fairly and adequately represent the interests of all members of the class; (2) that they have no conflict of interest with the class members; (3) that they have a genuine personal interest, not a mere technical interest, in the outcome of the case; (4) that they will adequately represent members outside the state; (5) that class members are so numerous that it is impractical to bring them all before the court; and (6) that adequate notice is given to all class members."
Id. (cleaned up) (quoting Faulkenbury , 345 N.C. at 697, 483 S.E.2d 422 ).
¶ 11 Once a party seeking class certification meets these requirements, "it is left to the trial court's discretion whether a class action is superior to other available methods for the adjudication of the controversy." Id. (cleaned up).
Class actions should be permitted where they are likely to serve useful purposes such as preventing a multiplicity of suits or inconsistent results. The usefulness of the class action device must be balanced, however, against inefficiency or other drawbacks.... [T]he trial court has broad discretion in this regard and is not limited to consideration of matters expressly set forth in Rule 23 or in [existing caselaw].
Crow , 319 N.C. at 284, 354 S.E.2d 459. Accordingly, "the touchstone for appellate review of a Rule 23 order ... is to honor the ‘broad discretion’...
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