Class Action Defense Cases-Grays v. Carrier: Washington Federal Court Rejects Defense Arguments Against Certification Of Class Action Holding The Presumption Of Reliance Applied In This Fraud Class Action

May 4, 2007 | By: Michael J. Hassen

Presumption of Reliance may be Applied in Fraud Class Action Lawsuit Where Defendant’s Omission is Primarily at Issue, and Existence of Individual Statute of Limitations Defenses does not Preclude Certification of Class Action Washington Federal Court Holds

Plaintiffs filed a putative class action against Carrier Corporation for misrepresentation, violation of Washington’s Consumer Protection Act (WCPA), unjust enrichment and breach of warranty alleging that the company “concealed a known defect in its high-efficiency condensing furnaces.” Grays Harbor Adventist Christian School v. Carrier Corp., _\_F.Supp.2d __ (W.D. Wash. May 1, 2007) [Slip Opn., at 2]. Plaintiffs moved to certify the lawsuit as a class action, id., at 1; defense attorneys opposed certification as a class action, primarily arguing that the commonality and superiority requirements of Rule 23(b)(3) had not been met, id., at 5. The district court certified the class action as requested, concluding that the requirements of FRCP Rule 23(a) and (b)(3) have been met.

The district court first addressed the requirements of Rule 23(a). Because the putative class consists of thousands of members, the court found that Rule 23(a)(1)’s numerosity requirement had been met. Grays, at 3. The federal court further found that the proposed class action “clearly” satisfied Rule 23(a)(2)’s commonality requirement, explaining at page 3:

Questions common to the class include: (1) whether the CHXs were defective; (2) whether Carrier knew or should have known about that defect; (3) whether Carrier had a duty to disclose that defect; (4) whether Carrier concealed that defect from the class; (5) whether the facts that were allegedly not disclosed were material; and (6) whether the alleged failure to disclose violated the WCPA.

The district court also readily found that Rule 23(a)(3)’s typicality and Rule 23(a)(4)’s adequacy of representation requirements were satisfied. Grays, at 3-4.

Turning to Rule 23(b)(3)’s requirement that common questions “predominate over any questions affecting only individual members” and that class action treatment be “superior to other available methods for the fair and efficient adjudication of the controversy,” defense attorneys argued that reliance is a necessary element of the alleged fraud and that certification of a class action is generally inappropriate if questions of reliance by class members is at issue. Grays, at 5. The district court disagreed, holding at page 6 that “[a] presumption of reliance is appropriate in fraud cases such as this one, where Plaintiffs have primarily alleged omissions, even though the Plaintiffs allege a mix of misstatements and omissions.” The court explained, “Proof of the omissions will not be based upon information each class member received about the furnaces, but on what Carrier allegedly concealed in light of what consumers reasonably expect.” Id. The federal court also rejected defense arguments that individual statute of limitations defenses render the litigation unsuitable for class action treatment, id.

Finally, the court held that the superiority requirement was met, particularly in light of the large number of class members. Grays, at 6-7. The federal court observed that because the dispute may affect “tens of thousands” consumers, “other Carrier consumes may eventually threaten to burden the courts, should the named Plaintiffs prevail on their claims,” id., at 7. Interestingly, the court also opined that such individual actions would be “probable” because of the amount of damages potentially recoverable, id., though it had earlier relied on the “relatively small amount [recoverable] in relation to the cost of litigating such claim[s],” id. In any event, the federal court granted the motion and certified the litigation as a class action. Id., at 7-8.

NOTE: The class is defined as “All individuals and entities in the state of Washington who currently own Carrier 90% high-efficiency condensing furnaces manufactured after January 1, 1989, and equipped with polypropylene-laminated secondary heat exchangers (‘PPL-CHXs’), and former owners of such furnaces in the state of Washington whose furnaces experienced CHX failure.” Grays, at 1.

Download PDF file of Grays Harbor v. Carrier Corporation

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