Rosenow v. Alltel Corp.

• Decision Date: 04 March 2010
• Docket Number: No. 09–463.,09–463.
• Citation: 2010 Ark. 26,358 S.W.3d 879
• Parties: Peter ROSENOW, Individually, and on Behalf of a Class of Similarly Situated Persons, Appellant, v. ALLTEL CORPORATION and Alltel Mobile Communications, Inc., Appellees.
• Court: Arkansas Supreme Court

2010 Ark. 26

358 S.W.3d 879

Peter ROSENOW, Individually, and on Behalf of a Class of Similarly Situated Persons, Appellant,

v.ALLTEL CORPORATION and Alltel Mobile Communications, Inc., Appellees.

No. 09–463.

Supreme Court of Arkansas.

Jan. 21, 2010.Rehearing Denied March 4, 2010.

Todd Turner, Arkadelphia, and Scott E. Poynter, Little Rock, for appellant.

Quattlebaum, Grooms, Tull & Burrow PLLC, by: Steven W. Quattlebaum, E.B. Chiles IV, and Chad W. Pekron, Little Rock, for appellees.

DONALD L. CORBIN, Justice.

Appellant Peter Rosenow, individually, and on behalf of a class of similarly situated persons, appeals the order of the Saline County Circuit Court denying his motion for class certification. On appeal, Appellant argues that the circuit court abused its discretion (1) by denying class certification on the basis that the elements of commonality, predominance, and superiority could not be satisfied; and (2) by denying his motion to strike the expert opinion of Dr. Jerry A. Hausman, regarding the calculation of potential damages incurred by Appellees. This court assumed jurisdiction of this case; hence, our jurisdiction is pursuant to Ark. Sup.Ct. R. 1–2(d) (2009). We reverse and remand this matter to the circuit court.

On February 15, 2006, Appellant filed a complaint, individually, and on behalf of a purported class, against Appellees Alltel Corporation and Alltel Mobile Communications, Inc., alleging damages resulting from Appellees' imposition of an early termination fee against its customers.¹ In his complaint, Appellant, who initially obtained cellular service with Appellees in 1997, states that he chose to terminate his cellular service because of dissatisfaction with the service Appellees provided. He was then charged an early termination fee of $200. Appellant disputed the fee and requested a copy of the contract that would justify imposition of the fee. Appellees refused to provide any contracts, claiming they were not required to do so. Appellant further stated that to his knowledge he never signed any contract or otherwise agreed to pay an early termination fee. When Appellant refused to pay the fee, Appellees continued to add additional late fees and taxes to his account, with the total due being $229.87. Appellant paid the bill in full, but under protest, on October 17, 2005, out of fear that Appellees would take adverse action against him.

Thereafter, Appellant filed the instant suit alleging that imposition of the early termination fee violated the Arkansas Deceptive Trade Practices Act (ADTPA), and also constituted a violation of the common law theory of unjust enrichment. Appellant further alleged that the requirements for a class action could be satisfied and requested that a class be certified and defined as

[a]ll Arkansas residents, excluding Defendants' employees, who have paid the Defendants' early termination fee within the last five years immediately preceding the date of the filing of the Complaint up through and including the date of the judgment in this case.

In his prayer for relief, Appellant requested, among other things, that the circuit court declare the fee to be void, order Appellees to extinguish all such fees on the accounts of class members, and to refund the class members any and all early termination fees and any related fees previously paid.

Appellees opposed class certification. As part of the evidence used to support their position against class certification, Appellees submitted a “declaration” by Dr. Hausman, an economics and telecommunications expert from the Massachusetts Institute of Technology. Dr. Hausman compared the early termination fee to Appellees' potential losses and then made the following conclusions: (1) there was no injury to the members of the alleged class; (2) there existed an intraclass conflict based on calling plans, termination dates, etc.; and (3) certification of a class was not warranted because of the necessity of individualized determinations of injuries. Finally, Dr. Hausman stated that there was a possibility that an intraclass conflict might arise because some customers could owe more in damages than the $200 early termination fee and because a majority of subscribers would prefer to sign a contract and be subjected to the early termination fee.

Appellant filed a motion to strike this declaration, arguing that it was not admissible under Ark. R. Evid. 702, as it was a legal opinion that told the court how to rule. Appellant also argued that Dr. Hausman's opinion was unreliable and therefore inadmissible.

A hearing on the issue of class certification and on the motion to strike the declaration was held on October 8, 2007. Before ruling on the motion to strike, the circuit court allowed Dr. Hausman to testify. His testimony reiterated his conclusions found in the previously submitted declaration. Ultimately, the circuit court denied Appellant's motion to strike the expert opinion of Dr. Hausman. The court also denied the request for class certification. A written order was entered on January 26, 2009. Therein, the circuit court concluded that Appellant had satisfied his burden under Ark. R. Civ. P. 23, with regard to typicality, numerosity, and adequacy. However, the court further found that Appellant had not satisfied his burden with regard to commonality, predominance, and superiority. Specifically, the circuit court found that each class member would need to prove that “the ETF is disproportionate to Alltel's actual damages arising out of the particular class member's breach of contract by terminating early” in order to establish that the fee is not a valid liquid-damages provision. The circuit court concluded that because there was no common amount of damages sustained by Appellees as a result of early termination, it would be necessary to conduct individual comparisons and, thus, class certification was not appropriate. This appeal followed.

As his first point on appeal, Appellant argues that the circuit court abused its discretion in denying his request for class certification. According to Appellant, the circuit court utilized an improper merits-based analysis that led to the conclusion that the requirements of commonality, predominance, and superiority could not be satisfied. Appellees counter that the circuit court did not delve into the merits of the case but rather looked to the elements of Appellants' claims to determine that class certification was not warranted.

In reviewing a circuit court's decision to grant or deny class certification, we give circuit courts broad discretion and will reverse only when the appellant can demonstrate an abuse of discretion. Simpson Housing Solutions, LLC v. Hernandez, 2009 Ark. 480, 347 S.W.3d 1. When reviewing a circuit court's class-certification order, we review the evidence contained in the record to determine whether it supports the circuit court's decision. Id. Neither this court nor the circuit court delves 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.; see also Johnson's Sales Co. v. Harris, 370 Ark. 387, 260 S.W.3d 273 (2007).

Class actions are governed by Rule 23 of the Arkansas Rules of Civil Procedure, which provides in pertinent part:

(a) Prerequisites to Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties and their counsel will fairly and adequately protect the interests of the class.

(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. At an early practicable time after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained. For purposes of this subdivision, “practicable” means reasonably capable of being accomplished. An order under this section may be altered or amended at any time before the court enters final judgment. An order certifying a class action must define the class and the class claims, issues, or defenses.

Ark. R. Civ. P. 23(a), (b) (2009). Our law is well settled that the six requirements for class-action certification include: (1) numerosity, (2) commonality, (3) typicality, (4) adequacy, (5) predominance, and (6) superiority. See Flow Doc, Inc. v. Horton, 2009 Ark. 411, 334 S.W.3d 865. We need only discuss the three contested requirements: commonality, predominance, and superiority. We begin with commonality and predominance.

Pursuant to Rule 23(a)(2), the trial court must determine whether “there are questions of law or fact common to the class.” This court has stated that this requirement is case specific. Johnson's Sales, 370 Ark. 387, 260 S.W.3d 273. We have previously stated the following regarding the commonality issue:

Rule 23(a)(2) does not require that all questions of law or fact raised in the litigation be common. The test or standard for meeting the rule 23(a)(2) prerequisite is ... that there need be only a single issue common to all members of the class.... 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...