Sixth Circuit Strikes Out Class Allegations At Pleadings Stage

on December 20, 2011 ·

Posted in Class Action Law Suits,Consumer Fraud - False Advertising,Procedural Matters

Contributing Author: Eric Lyttle

We here at the Monitor are always looking for creative ways to make early attacks on facially unsustainable class allegations.  The Sixth Circuit recently made a strong statement on this front by affirming a district court’s order granting a motion to strike class allegations, on the grounds that individual questions raised by the fifty states’ consumer protection laws predominated over any factual questions common to the proposed class.  Pilgrim v. Universal Health Card, LLC, 660 F.3d 943 (6th Cir. 2011).

In Pilgrim, the plaintiffs pled a nationwide class against the defendants, alleging that they had deceptively marketed a plan for obtaining discounted health services in violation of the Ohio Consumer Sales Practices Act (the law of one of the defendants’ residences).  Rather than await a motion for class certification, one of the defendants moved to strike the class allegations at the responsive pleadings stage.  The defendant argued that the law of each individual class member’s state of residence governed his claims, such that the laws of all fifty states must be applied and individual issues would predominate over common ones.  The district court agreed, struck the class allegations, and dismissed for lack of subject matter jurisdiction.

The Sixth Circuit affirmed.  It agreed that the law where the injury occurred governed each class member’s claim, and that the individual legal questions raised by the fifty states’ laws predominated over any common factual questions.  Individual fact issues also plagued the allegations, including regional variations in availability of discounts, a substantial number of apparently satisfied customers in the class, and differences in the defendants’ advertising due to the varying requirements of state consumer-protection laws.

The Sixth Circuit’s ruling is an instructive and welcome precedent for attacking class certification on the pleadings, before class discovery in certain instances.  While the plaintiffs maintained that the court addressed the class issues prematurely and that they should be entitled to class discovery, the Sixth Circuit noted that Fed. R. Civ. P. 23(c)(1)(A) contemplates resolution of certification “at an early practicable time,” not necessarily only once class discovery has occurred.  Pilgrim should be kept in mind not only by those facing class allegations that require application of all fifty states’ laws, but in other instances when the allegations on their face defy even the possibility of compliance with Rule 23’s predominance and superiority requirements.

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