A payment to the class representative in a class action lawsuit won’t stop the legal action, according to a decision by the Maryland Court of Appeals. The state’s top court indicated that to rule differently would allow defendants to stop class actions by “picking off” the plaintiffs who bring such lawsuits.
The decision also means that a class action lawsuit over alleged misrepresentations in the selling of extended warranties for automobiles could still wind its way through the Maryland court system.
The court’s decision had its beginnings in the purchase of an extended warranty for a Ford Explorer. Anthony Frazier said Crystal Ford Isuzu Ltd. (Crystal Ford) sold him the warranty for his 2003 Ford Explorer on December 23, 2004. Frazier said the salesman told him that the extended warranty would last for 48 months from the date of purchase or 100,000 miles, whichever occurred first. In fact, the duration of the warranty was calculated from the “build date” of the vehicle. As a result, the warranty expired on October 30, 2006, more than two years earlier than Frazier had been led to believe.
According to Crystal Ford, Frazier received a new car warranty that ran from the “in service” date of the vehicle rather than a used car warranty that would have run from the date of purchase of the warranty. Frazier said that because the warranty expired earlier than promised, he incurred unanticipated repair expenses. Frazier said that when he complained, the salesperson told him there was nothing she could do because the warranty contract measured the four years from the “build date” of the car even though the application for the warranty stated a longer duration. Frazier said the salesperson admitted that she had sold other extended warranties with the same discrepancy. Crystal Ford conceded that it made a mistake in explaining the warranty to Frazier, the court observed in a footnote.
Frazier hired a lawyer, who asked for compensation for actual repairs and for anticipated repairs during the period when Frazier thought the warranty would be valid. When Crystal Ford didn’t respond, Frazier filed a lawsuit in the Circuit Court for Montgomery County, alleging two causes of action — unfair and deceptive trade practices in violation of the Consumer Protection Act and common law fraud. Frazier also requested that the lawsuit be certified as a class action on behalf of all the persons who had purchased Ford extended warranties from Crystal Ford during the previous four years.
After the complaint was filed, Crystal Ford paid to extend Frazier’s warranty. As a result, Ford ESP North America sent him a check for the amounts he had paid for repairs minus a small deductible. Frazier did not cash the check. Crystal Ford also filed an answer to the complaint and then filed a motion for summary judgment, a motion to deny class certification and a motion to limit further discovery. Crystal Ford told the court that it had contacted other customers who had purchased warranties to ensure that the warranties conformed to the representations made at the time they were sold. Crystal Ford’s attorney said that about half the customers had been contacted at the time of the hearing.
The trial court determined that the efforts by Frazier’s attorney to obtain class certification had “helped to motivate Crystal Ford to correct the warranties of other members of the putative class.” The court granted the motion to deny class certification and, in part, granted Crystal Ford’s motion for summary judgment, leaving open the issue of attorney’s fees for a later hearing.
The Court of Special Appeals affirmed the trial court and essentially held that, in certain circumstances, a defendant may abort a class action prior to class certification by giving individual damages to the plaintiff who initiated the case – even if that offer is declined and regardless of whether the claims are suitable to class litigation or the individual plaintiff would qualify as a class representative.
The state’s top court decided to take the case. The Court of Appeals noted that one of the questions presented by the lawsuit was whether a class action can be short-circuited by making a payment to the class representative – the plaintiff whose name is listed on the complaint. “While a rule that a defendant may moot a putative class action by tendering individual damages prior to certification of the class is a bright line rule, it is not a wise one,” the court said. “If all a defendant need to do to defeat a class action is to satisfy the class representative’s claim immediately after suit is filed, many meritorious class actions will never get off the ground,” the court observed, adding that other jurisdictions have held that, even prior to the filing of a motion for class certification, an offer of judgment for the full amount of the class representative’s individual claim does not automatically moot the class claims.
As a result, the Court of Appeals reversed the other courts’ decisions and sent the lawsuit back to the trial court to determine whether Frazier had had an adequate opportunity to file a timely motion for class certification.
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