Vaughn v. Mercy Clinic Fort Smith Cmtys.

• Decision Date: 14 November 2019
• Docket Number: No. CV-19-217,CV-19-217
• Citation: 2019 Ark. 329,587 S.W.3d 216
• Parties: Heather VAUGHN and Dawn France, Appellants v. MERCY CLINIC FORT SMITH COMMUNITIES; Mercy Health Fort Smith Communities; and Cooper Clinic, P.A., Appellees
• Court: Arkansas Supreme Court

2019 Ark. 329

587 S.W.3d 216

Heather VAUGHN and Dawn France, Appellants

v.MERCY CLINIC FORT SMITH COMMUNITIES; Mercy Health Fort Smith Communities; and Cooper Clinic, P.A., Appellees

No. CV-19-217

Supreme Court of Arkansas.

Opinion Delivered: November 14, 2019

Holleman & Associates, P.A., by: John Holleman and Timothy A. Steadman, for appellants.

Littler Mendelson, P.C., Fayetteville, by: Eva C. Madison, for appellee Cooper Clinic, P.A.

COURTNEY RAE HUDSON, Associate Justice

Appellants Heather Vaughn and Dawn France appeal the Sebastian County Circuit Court's order denying their motion for class certification. For reversal, appellants argue that the circuit court abused its discretion by (1) finding that they did not satisfy the requirements for class certification under Rule 23 of the Arkansas Rules of Civil Procedure and (2) denying their motion to certify the class based on payments made to the putative class members. We reverse and remand.

Appellants are former employees of appellee Cooper Clinic, P.A., a medical provider that at one time had more than 400 employees in ten office locations throughout the river valley in western Arkansas. Cooper Clinic operated in the area since 1920 and extended vacation benefits to its employees including appellants. In 2018, appellees Mercy Clinic Fort Smith Communities and Mercy Health Fort Smith Communities (Mercy) acquired Cooper Clinic's assets. Representatives of Cooper Clinic and Mercy kept employees informed about what would happen to their benefits when their employment transitioned to Mercy. Initially, representatives told employees that their accrued vacation time would transfer to Mercy when the transition took place January 28, 2018. However, in a January 24, 2018 memo, Mercy told the employees that Cooper Clinic would be unable to transfer the vacation time to Mercy. That same day, Cooper Clinic sent employees a memo stating that it was unable to transfer their vacation balances to Mercy. The memo advised the employees that the vacation time "will remain on the Cooper Clinic books" until the corporation is dissolved and that vacation time would then be paid to the employees if finances allowed.

The employees transferred to Mercy on January 28, 2018, thus terminating their employment with Cooper Clinic. Twelve days later, the original plaintiffs, Sara Bryson, Emily Brown, and Danielle Pfeiffer, filed a class-action complaint against Cooper Clinic and Mercy with causes of action of promissory estoppel, unjust enrichment, and breach of contract. The three original plaintiffs sought payment for their vacation time, pre- and post-judgment interest, costs, expenses, and attorney's fees. On July 11, 2018, Cooper Clinic served offers of judgment to the three original plaintiffs, and all three accepted. On July 24, 2018, the plaintiffs amended the complaint and added Vaughn and France as plaintiffs. That same day, the plaintiffs filed a motion for class certification seeking a class of former Cooper Clinic employees. The plaintiffs sought to certify a class to consist of

[a]ll individuals who worked for Cooper Clinic for more than 1 year on the date of their termination who were terminated by Cooper Clinic in 2018 as part of the merger with Mercy, and who were not paid for their unused vacation time.

Cooper Clinic moved to dismiss the complaint or for a stay, with its counsel explaining at a July 26, 2018 hearing that Cooper Clinic's assets consisted of real estate and other nonliquid assets. Although it believed it had no obligation to pay, Cooper Clinic stated that it was attempting to sell a dialysis center, which would generate funds to pay the vacation time.¹ On July 30, 2018, the circuit court denied the motion to dismiss but granted a ninety-day stay to allow Cooper Clinic to attempt the dialysis-center sale. The circuit court's order conditioned the stay on Cooper Clinic's (1) prioritizing the payment of the vacation time above other obligations except taxes, (2) immediately notifying the court and opposing counsel if the sale was delayed or cancelled, and (3) immediately notifying the court and opposing counsel when the sale was finalized and when payment would be made. The appellants moved for relief from the stay and argued that the order acted as a final judgment. The circuit court denied the motion, and appellants took no further action to contest the finding.

On September 12, 2018, Cooper Clinic notified the circuit court and all counsel that the planned sale had fallen through. At a hearing in October, Cooper Clinic told the circuit court that payment of the vacation time remained a priority and that it had a new potential buyer with a sale likely before the end of November 2018. Cooper Clinic also informed the circuit court that it had some cash on hand from an insurance refund and planned to pay a significant number of its employees for their unused vacation time within two weeks.

On October 29, 2018, the circuit court entered an order granting appellees until November 19, 2018, to file a response to the class-certification motion. The dialysis-center sale was completed in early November 2018, and Cooper Clinic sent payments to all employees with unused vacation-time balances. Cooper Clinic did not notify either the court or the opposing counsel of the payments and did not seek any form of release.

At the December 12, 2018 class-certification hearing, Cooper Clinic opposed the motion for class certification and argued that the putative class members had already been paid for their unused vacation time. The circuit court agreed and on January 14, 2019, denied the motion for class certification, observing that the class was defined by plaintiffs to consist of those "who were not paid for their unused vacation time," and that all former employees had been paid for their unused vacation time. Based on this payment, the circuit court determined that the requirements of Rule 23, "particularly those of numerosity and typicality, cannot be met." Appellants filed a timely appeal pursuant to Arkansas Rule of Appellate Procedure—Civil 2(a)(9) and argue that the circuit court abused its discretion by denying their motion for class certification.

Class certification of a lawsuit is governed by Rule 23 of the Arkansas Rules of Civil Procedure. 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. GGNSC Arkadelphia, LLC v. Lamb ex rel. Williams , 2015 Ark. 253, 465 S.W.3d 826. 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, and our focus is on whether the requirements of Rule 23 are met without regard to whether the petition will succeed on the merits or even if it states a cause of action. Id.

Our law is well settled that the six requirements for class-action certification, as stated in Rule 23, are (1) numerosity, (2) commonality, (3) typicality, (4) adequacy, (5) predominance, and (6) superiority. Gen. Motors Corp. v. Bryant , 374 Ark. 38, 285 S.W.3d 634 (2008). In addition to the requirements of Rule 23, the court must be able to objectively identify members of the class. Farmers Ins. Co. v. Snowden , 366 Ark. 138, 233 S.W.3d 664 (2006).

As set forth above, appellants argue (1) that they met the Rule 23 requirements for class certification and (2) that the circuit court erred in considering Cooper Clinic's payment in determining that those requirements had not been met. In opposing the class-certification motion, appellees did not seriously contest appellants' claim that they met the Rule 23 requirements. Instead, in their response to appellants' motion, appellees argued that Cooper Clinic's payment of the unused vacation time mooted the class issues. In essence, the appellees contend that the class no longer exists because of the payment of the unused vacation time.

It is axiomatic that for a class to be certified, a class must exist. Walker v. Wilmoe Corp. , 2017 Ark. 340, 531 S.W.3d 387. Additionally, for a class to be sufficiently defined, the identity of the class members must be ascertainable by reference to objective criteria. Id. Ascertainability is an aspect of the requirement that a class must exist prior to any consideration of Rule 23's requirements. Arch Street Pawn Shop, LLC v. Gunn , 2017 Ark. 341, 531 S.W.3d 390. A class definition must lay out objective factors from which is it administratively feasible to ascertain whether a particular individual is a member of the proposed class. Id.

The proposed class in this case includes individuals who worked for Cooper Clinic for more than one year "on the date of their termination," and "were terminated" and "were not paid for their vacation time." Reading the proposed class definition in concert with appellants' amended complaint and demand for pre- and post-judgment interest convinces us that the class does exist and is ascertainable. Appellants alleged in their amended complaint that compensation for the unused vacation time "was due and owing on the date of their termination," and "should have been paid with their final paycheck." Interest began to accrue, according to appellants' theory, when the employees were terminated and were not paid for their unused vacation time. In their brief, appellants argue that common questions for the class include whether Cooper Clinic promised but failed to pay its employees for "unused vacation time upon the termination of their employment." Appellants also argue that a common question is whether Mercy is liable to the class members "for employment compensation due and owing at the time Cooper Clinic was acquired." The class of individuals who were not paid for their unused vacation time at the time of the termination of their employment with Cooper Clinic still exists. Additionally, although...