In Schmidt, plaintiffs claimed in part that they were entitled to compensation from their former employer pursuant to a written separation pay policy.Summary of this case from Hamilton v. Ohio Sav. Bank
Decided December 31, 1984.
Civil procedure — Class actions — Denial of class certification no abuse of discretion, when.
APPEAL from the Court of Appeals for Hamilton County.
On March 9, 1973, appellee Avco Corporation ("Avco") sold its business and assets to appellee Cincinnati Electronics Corporation ("C.E."). Of the six hundred thirty-nine salaried employees employed by Avco at the time of the sale, six hundred eight were hired by C.E., including the three appellants herein.
Appellants, Raymond F. Schmidt, Marion A. Waller and Oma Wilson, on March 20, 1981, filed a five-count class action complaint against C.E. and Avco. In their complaint, appellants described the class they sought to represent as follows: the class "* * * consists of those former salaried employees of Avco who, on or about March 9, 1973, were terminated by Avco and thereafter hired by C.E. pursuant to a plan whereby Avco sold the Evendale operation of its Electronics Division to C.E., including those who were hired by C.E. in March, 1973, but have since retired or otherwise terminated employment. With respect to the Second, Third and Fourth Claim[s], the class also includes those former salaried employees of Avco who, on or about March 9, 1973, were terminated by Avco and not thereafter hired by C.E. The class also includes beneficiaries of a decedent who at any time met the aforesaid class qualifications." Appellants estimated the class numbered approximately six hundred fifty members.
Connecticut General Life Insurance Co. was also a named defendant. A stipulation was subsequently filed whereby Connecticut General agreed to abide by any order of the court with regard to funds it was holding.
In their first claim for relief, it is charged that Avco refused to make payment in accordance with the written separation pay policy in force prior to and at the time of the sale. Appellants alleged this policy had been part of the overall employment compensation promised to the class members and constituted a binding contract between Avco and each class member.
The second, third and fourth claims for relief relate to Avco's Retirement Income Plan for Salaried Employees which was a contributory plan in effect in March 1973 and part of the overall employment compensation promised to the class members. Count Two asserts that Avco distributed booklets that contained misleading and incomplete statements which did not accurately describe the plan benefits. In their third claim for relief, appellants charge that the two percent interest per annum payment on withdrawn employee contributions was unconscionable and grossly unfair inasmuch as the earnings on these contributions would exceed the two percent credited interest rate and accrue directly to the benefit of Avco. Appellants' final claim against Avco alleges that insurance was purchased using plan participants' contributions, at premium rates not in the best interest of the class members.
The fifth claim is directed solely against C.E. It is alleged that the agreement of purchase and sale obligated C.E. to provide benefits "substantially equivalent" and "comparable" to those provided to class members prior to the sale, and that C.E. had failed to do so, thereby causing monetary damage to the class members.
Appellants sought class certification, compensatory and punitive damages and reasonable attorney fees.
In its answer, Avco denied the appropriateness of the class action, and raised several defenses, including failure to state a claim upon which relief can be granted, accord and satisfaction, statute of limitations bar, laches, waiver, and estoppel. Avco also filed a cross-claim against C.E., asserting that if Avco is liable, C.E. is obligated under the Agreement and the Assumption of Obligations to indemnify Avco.
C.E. likewise challenged class certification and raised the following among its defenses: failure to state a claim upon which relief can be granted, statute of frauds, statute of limitations, and waiver and estoppel.
On June 19, 1981, appellants filed a "motion for order determining that action be maintained as a class action," accompanied by a supporting memorandum. Appellees filed memoranda in opposition to the motion. After an evidentiary hearing, the trial court, in a letter opinion, denied appellants' motion to have the class certified as a class action, finding that, with the exception of Civ. R. 23(A)(1), appellants had failed to meet their burden of satisfying all the requirements of Civ. R. 23.
On appeal, the trial court's denial of class certification was upheld. The court of appeals found that appellant had satisfied the commonality requirement (Civ. R. 23[A]) and the typicality requirement (Civ. R. 23[A]). It held that class action status must nevertheless be denied because appellants had failed to establish that they could fairly and adequately protect the interests of the class as required by Civ. R. 23(A)(4) because of the predominance of individual questions of law and fact among differently situated purported class members and that a class action would not be a superior method of adjudication as required by Civ. R. 23(B)(3) because of the complexities and factual inconsistencies among purported class members.
This cause is now before the court pursuant to the allowance of a motion to certify the record.
Drew, Ward Graf Co., L.P.A., Mr. Richard H. Ward and Mr. William R. Graf, for appellants.
Messrs. Taft, Stettinius Hollister, Mr. Robert G. Stachler, Mr. Thomas R. Schuck, Messrs. Dinsmore Shohl, Mr. Mark A. Vander Laan and Mr. Stephen S. Eberly, for appellees.
The sole issue presented in this case is whether the trial court properly refused to certify this case as a class action. This court holds that the denial of class certification herein did not rise to the level of abuse of discretion and accordingly upholds the rulings of the lower courts.
The law to be applied to this case is not in dispute. It is well-established that a trial judge has broad discretion in determining whether a class action may be maintained. Absent a showing of abuse of discretion, a trial court's determination as to class certification will not be disturbed. See, e.g., Vinci v. American Can Co. (1984), 9 Ohio St.3d 98. It is within this context that this court addresses the specifics of this class action determination.
In order to maintain a class action, the requirements of Civ. R. 23(A) and 23(B) must be met. Four prerequisites must be satisfied under Civ. R. 23(A) and the failure to satisfy any one of the four will result in the denial of certification:
"(A) 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 will fairly and adequately protect the interests of the class."
In addition, it must also be shown the action comes within the purview of at least one of three types of class actions described in Civ. R. 23(B). The focus in this case has been on Civ. R. 23(B)(3) which provides as follows:
"[T]he 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. * * *"
Applying these standards to the instant case, while remaining mindful that the failure to meet any one of these prerequisites will defeat a request for class certification, this court cannot find that the trial court abused its discretion in denying certification. Specifically, this court finds that there is ample support in the record to support the lower courts' determinations that questions of law or fact common to the members of the class do not predominate over any questions affecting only individual members or that a class action is not superior to other available methods for resolving the controversy fairly and efficiently as is required by Civ. R. 23(B)(3).
In reaching this determination, this court has been guided by generally accepted interpretations of the requirements of Civ. R. 23(B)(3) as well as by the specific guidelines outlined in the rule. Thus, while what is meant by "predominate" is not made clear by the rule, it is generally held that in determining whether common questions of law or fact predominate over individual issues, it is not sufficient that common questions merely exist; rather, the common questions must represent a significant aspect of the case and they must be able to be resolved for all members of the class in a single adjudication. And, in determining whether a class action is a superior method of adjudication, the court must make a comparative evaluation of the other procedures available to determine whether a class action is sufficiently effective to justify the expenditure of judicial time and energy involved therein. Wright Miller, Federal Practice and Procedure (1972) 59, Section 1779.
To aid courts in determining whether there has been compliance with the Civ. R. 23(B)(3) requirements of predominance and superiority, i.e., requirements that demonstrate the utility and propriety of employing the class action device, the drafters listed four factors which they deemed to be particularly relevant:
"(a) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (b) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (c) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (d) the difficulties likely to be encountered in the management of a class action."
These factors simply emphasize the policy objectives of the rule. Their consideration requires the court to focus on the efficiency and economy elements of the class action while emphasizing that special caution must be employed in Civ. R. 23(B)(3) class actions because of the loose affiliation among these class members which magnifies the risks inherent in any representative action. Wright Miller, supra, at 46, Section 1777.
An examination of the complaint and record in the instant case supports the lower courts' determination that a class action would be inefficient and non-economical herein because the claims raised involve non-common issues that are either inextricably entangled with common issues or are too unwieldy to be handled adequately on a class action basis.
Appellants state in their first claim that on the date of sale Avco had in effect a written separation pay policy entitling employees to compensation if they were terminated due to a reduction in work force and that Avco refused to pay such compensation to those hired by C.E. The claim further alleges that the separation pay policy was "an inducement for each class member to remain in Avco's employ and constituted a binding contract between Avco and each class member." The appellate court determined as follows. If this claim is viewed as raising the doctrine of promissory estoppel, as Avco so argues, then the circumstances of each individual employee would need to be analyzed and the elements of inducement and reliance would have to be proven with respect to each individual member of the proposed class. If this claim is decided under contract principles, individual issues would still predominate, for it raises the possibility of an issue of proof as to each individual class member's awareness of the offer to pay separation benefits as provided for in the policy. Finally, if the policy is construed as making the search for other employment a condition precedent to payment of benefits, then it would be necessary to determine which of the individual employees hired by C.E. also looked for other employment.
The policy states:
"The purpose and intent of this policy is to specify benefits including compensation for a reasonable amount of time while seeking other employment in the event an employee is laid off due to a reduction in force." (Emphasis added.)
Likewise, the lower court found that the third claim, which asserts that payment under the pension plan of only two percent interest on withdrawn employee contributions was "unconscionable," raises individual issues as well. It requires differentiating between employees who withdrew their contributions from those who did not.
Finally, the court determined that the fifth claim, which alleges that C.E. has not provided retirement and other fringe benefits "substantially equivalent" or comparable to those provided by Avco at the time of sale, could potentially raise individual issues as to which employees saw the notice posted on the bulletin board which allegedly assured comparable benefits, and which employees relied upon it in accepting employment with C.E. The court also stated that "[i]f the benefits at C.E. were found not to be `substantially equivalent' to those at Avco, the computation of damages would involve an analysis as to the type of benefits (such as medical and life insurance, severance pay, and retirement pay) each individual was entitled to and received at Avco compared to the type of benefits entitled to and received at C.E.," thus presenting some complex individual issues.
The lower court also founded its denial of class certification on the difficulties that would be encountered in managing this class action. The court noted that the creation of several subclasses would be necessitated. Count One would require the creation of a subclass consisting of those terminated employees hired by C.E., inasmuch as it is alleged that the separation pay policy was "* * * an inducement for each class member to remain in Avco's employ * * *." (Emphasis added.) The second, third and fourth claims, all of which concern Avco's pension plan, would also necessitate the creation of a subclass since participation in the plan was voluntary and there was not one hundred percent participation. The third claim would additionally require the creation of a subclass within a subclass, separating those who participated in the plan and withdrew their contributions at two percent interest from those who made no withdrawals. Finally, a subclass consisting of those employees hired by C.E. would be required with regard to the fifth claim because it alleges that C.E. did not provide benefits comparable to Avco as promised.
This court is well aware that Civ. R. 23(C)(4)(b) specifically authorizes the court to divide the class into appropriate subclasses. Nonetheless, the requirements for a class action must still be met. Under Civ. R. 23(B)(3), a class action must be superior to all other available methods for adjudication of the controversy and one of the tests of superiority is the manageability of the action.
Based on the above, this court cannot find that the lower courts abused their discretion in denying class certification due to the presence of complex individual issues and the necessity for the creation of multiple subclasses. The record supports the determination that, under these facts, the disadvantages of complexity and possibility of prejudice outweigh the advantages of common treatment. Here, where individual rather than common issues predominate, the economics of time, effort, and expense and the efficiency of class action treatment are lost, and the need for judicial supervision and the risk of confusion are magnified. Under such circumstances, a class action is clearly inappropriate.
For the foregoing reasons, the judgment of the court of appeals is affirmed.
CELEBREZZE, C.J., W. BROWN, SWEENEY, LOCHER, HOLMES, C. BROWN and J.P. CELEBREZZE, JJ., concur.