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State ex rel. U-Haul Company of West Virginia v. Tabit

State ex rel. U-Haul Company of West Virginia v. Tabit

Case No. 
17-1052
Opinion Date: 
5/21/2018
Opinion Author: 
Memorandum Opinion
Decision 
Writ Denied
Vote: 
5-0
Facts 

In this class action case, the plaintiffs alleged that the defendant, U-Haul, violated provisions of West Virginia’s consumer laws and was otherwise liable for improper charges in its rental contracts.  Specifically, the plaintiffs challenged an “environmental” fee that was not required by any government regulation but was, nevertheless, included as a mandatory charge with every rental.  U-Haul alleged that a customer could, in fact, request a refund of the environmental fee, but this policy was not explained to customers.

 

The record established that there was a variety of ways that customers could obtain a rental contract, including telephonically, electronically, or by a face to face encounter with a U-Haul representative.  Nevertheless, the circuit court found that the factors required for class certification under Rule 23 had been met including, inter alia, the requirements of commonality and predominance.  The circuit court entered a class certification order and the defendant, U-Haul, filed for a writ of prohibition.

Issue 

Whether the circuit court abused its discretion when it applied the Rule 23 factors and found that class certification was proper?

Analysis 

Under Rule 23, a class may be certified only if a series of factors spelled out in the text of the rule is met.  In this case, the parties focused their energies on two of these factors--commonality and predominance.

“[C]ommonality” . . . requires that the party seeking class certification show that “there are questions of law or fact common to the class.” A common nucleus of operative fact or law is usually enough to satisfy the commonality requirement. The threshold of “commonality” is not high, and requires only that the resolution of common questions affect all or a substantial number of class members.  In Re W.Va. Rezulin Litig., 214 W.Va. 52, 57, 585 S.E.2d 52 (2003).

Citing Erie Ins. Property & Cas. Co. vs. Niebert, 2017 WL 564160 (W.Va. 2/13/17), U-Haul argued that the claims were too individualized to receive class treatment.  In Erie, the plaintiffs alleged that an insurer had failed to make a proper offer of underinsured motorist coverage under West Virginia law.  The Supreme Court found that certification was inappropriate because each plaintiff would have to “litigate the issue of whether Erie used a ... form that was in compliance with the form required by the insurance commissioner.”  Here, too, U-Haul claimed that individualized proof would be required, making the claims “unsuited for classwide determination.”

The plaintiffs, in turn, argued that the commonality factor was met because of U-Haul’s companywide policy regarding the environmental fee.  The policy, they said, affected all of the class members alike and, therefore, constituted a nucleus of operative facts and law that was common to the class.

The Supreme Court agreed with the plaintiffs.  “What matters to class certification …is…the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.”  In this particular case, regardless of whether the rental contract was procured by telephone, Internet, or otherwise, the companywide policy was the heart of the issue:  “Here, the companywide policy  was U-Haul’s business practice of charging an environmental fee that is not disclosed in the base price quoted for the rental but which is later automatically charged.”  There will be individualized issues in any class action litigation.  However, “the fact that class members must individually demonstrate their right to recover, or that they may suffer varying degrees of injury, will not bar a class action; nor is a class action precluded by the presence of individual defenses against class plaintiffs.”

The second factor that was reviewed by the Supreme Court was predominance: 

“The predominance criterion in Rule 23(b)(3) is a corollary to the ‘commonality’ requirement found in Rule 23(a)(2). While the ‘commonality’ requirement simply requires a showing of common questions, the ‘predominance’ requirement requires a showing that the common questions of law or fact outweigh individual questions.” Rezulin, 214 W.Va. at 71, 585 S.E.2d at 71.

With regard to the breach-of-contract claim, the Supreme Court found that the overriding issue boiled down to a lack of communication on U-Haul’s part.  This failure, which was common to everyone in the class, predominated over individualized issues:  “At issue in this case is U-Haul’s policy of failing to adequately disclose or explain the environmental fee to customers who do not ask and do not know to ask (particularly after declining the option of paying an environmental fee) and then failing to correctly explain its policy to those who do ask, including the failure to disclose that such fee can be waived if the customer disagrees.”

Similarly, the class issues predominated in the context of the claims for fraud and consumer law violations.  As the Supreme Court pointed out, “allegations that U-Haul fraudulently concealed, intentionally concealed, suppressed and omitted the information [regarding the fee] will be answered the same way for all class members.”  This was supported not only by the testimony of the Rule 30(b) representative produced by U-Haul, but also by the rental experiences of the plaintiffs themselves.

Commentary 

This was memorandum opinion, making its precedential value somewhat limited.  Despite this, it is a significant win for consumers.  Tightening the rules and requirements for class actions makes it almost impossible to seek a recovery for smaller wrongs.  Here, for example, the environmental fee ranges from $1 to $5 per contract, but it ended up putting over $300,000 in U-Haul’s pocket.  The pro-consumer decision reached here by the Supreme Court is good news for class litigation.      

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