Class Action Defense Cases–Danvers v. Ford Motor: Third Circuit Reverses Certification Of Class Action Holding Rule 23(b)(3)’s Predominance And Superiority Tests For Class Action Treatment Had Not Been Met

Nov 25, 2008 | By: Michael J. Hassen

Class Action Complaint by Car Dealers Against Ford Arising out of Blue Oval Program Erroneously Certified as Class Action because Rule 23(b)(3)’s Predominance and Superiority Requirements not met Third Circuit Holds

Nine plaintiffs filed a putative class action against Ford on behalf of themselves and other Ford dealers; the class action complaint alleged that Ford’s Blue Oval Program violated state and federal law. Danvers Motor Co., Inc. v. Ford Motor Co., 543 F.3d 141, 142-43 (3d Cir. 2008). The federal court dismissed the class action for lack of standing, and plaintiffs filed an amended class action complaint. Id., at 143. In response to a defense motion to dismiss the amended class action, the federal court again concluded that all but one of the named plaintiffs lacked standing to prosecute the action, id. The Third Circuit reversed. See Danvers Motor Co. v. Ford Motor Co., 432 F.3d 286 (3d Cir. 2005). Plaintiffs moved the district court to certify the litigation as a class action, and the court granted the motion. Danvers, 543 F.3d at 143. The Third Circuit granted Ford leave to appeal pursuant to Rule 28 U.S.C. § 1292(b), and reversed.

Ford’s Blue Oval Program, which ran from April 2000 to March 2005, was a voluntary program extended to all Ford dealers “to improve dealer performance and customer satisfaction” by “provid[ing] cash bonus payments and other benefits to Ford dealers who improved customer satisfaction according to certain criteria.” Danvers, at 143. The class action complaint alleged that the Blue Oval Program violated the Robinson-Patman Act, the Automobile Dealer’s Day in Court Act, and various state franchise laws. Id., at 143-44. The class action alleged further that Ford breached the terms of its Sales and Service Agreement with its dealers, and sought “both injunctive relief and damages on behalf of approximately 4,000 Ford dealers.” Id., at 144. However, the Third Circuit observed that some dealers were “certified” under the Blue Oval Program while other dealers were not certified under the Program, and that “dealers expended different efforts with respect to certification, [and] the dealers were impacted by the [Program] in different ways.” Id. Indeed, the Third Circuit summarized the way in which the specific injuries allegedly suffered by the nine named plaintiffs showed those differences, see id., at 144-45.

In the Third Circuit, a district court abuses its discretion in granting class action treatment if The District Court abuses its discretion where “‘its decision rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact.’” Danvers, at 147 (quoting Beck v. Maximus, Inc., 457 F.3d 291, 295 (3d Cir. 2006)). The problem with the class action claims is that they “reflect diverse and conflicting interests within the proposed class of Ford dealers,” id., at 147-48, and not all dealers were harmed by the program, id., at 148. The Third Circuit explained at page 148 that “[w]ith respect to plaintiffs’ Robinson-Patman Act claims in particular (which appear to be the principal claims), this diversity and conflict within the proposed class defeat the requirements for class certification. Rule 23(b)(3) requires that common issues predominate over individual issues, but the “rules and requirements of the BOP, standing alone,” reflect only a “common course of conduct,” not whether common issues predominate. Id. On the contrary, the putative class action “involves many non-common issues based on Ford’s conduct in implementing the [Program] and each proposed class member’s treatment under the [Program].” Id. The predominance requirement for a Rule 23(b)(3) class action thus was not satisfied. Id., at 148-49. The Circuit Court similarly concluded that predominance test was not met for the remaining class action claims: “Even assuming that the Automobile Dealer’s Day in Court Act, breach of contract, and breach of the covenant of good faith and fair dealing claims are all based on a single franchise agreement and single course of conduct, we cannot ignore the non-common issues that would require consideration in order to resolve plaintiffs’ claims.” Id., at 149. And for the same reasons, the Third Circuit held that the superiority prong of the Rule 23(b)(3)’s class action standard had not been satisfied. See id., at 149-50. Accordingly, the Circuit Court reversed the class action certification order, id., at 150.

NOTE: For reasons which are unclear, plaintiffs’ counsel elected to name as party-plaintiffs not only Ford dealers that had been “certified” under the Blue Oval Program, but dealers that had not been so certified. The Third Circuit noted that “The fact that named plaintiffs include among their ranks both certified and non-certified dealers increases the atypicality of their claims.” Danvers, at 150 (citation omitted).

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