Tuesday, January 15, 2008

Vandyne v. Allied Mortgage Capital Corp.[1]

Opinion handed down January 15, 2008
Link to Supreme Court Opinion

The Missouri Supreme Court held that the circuit court abused its discretion in certifying Plaintiffs' class definition because it included an improper merit determination and insufficiently definite terms, but agreed with the circuit court’s finding that the mere fact that a class attorney and named plaintiff were related did not amount to a violation of Supreme Court Rule 52.08’s adequacy of representation provision.



I. Facts and Holding

Brennan and Kimberly Vandyne (Plaintiffs) filed a suit against Allied Mortgage Capital Corporation (Allied) alleging that Allied violated the Missouri Merchandising Practices Act.[2] The circuit court sustained Plaintiffs' motion for class certification.[3] The circuit court defined the class as "'[a]ll persons in Missouri who, since March 18, 1997 through December 21, 2002, based on nondisclosure and false, unfair, deceptive or misleading disclosures of Defendant Allied Mortgage Capital Corporation, paid charges for credit reports and/or other loan related services for mortgage loans that exceeded defendant's actual cost for those services.'"[4] Allied contested class certification on three grounds, arguing: (1) that the class definition includes an improper merit determination; (2) that the term "loan-related services" is not sufficiently definite; and, (3) that Plaintiffs' counsel is operating under a conflict of interest and cannot adequately represent the class.[5]

The Missouri Supreme Court (Court) agreed with Allied's argument that the class definition included an improper merit determination. The Court explained that the descriptive "'nondisclosures and false, unfair, deceptive or misleading disclosures'" amounted to a legal conclusion that required an impermissible resolution of a paramount question of liability in order to identify class membership.[6] The Court noted that such a determination is improper because it "'may color the subsequent proceedings and place an unfair burden on the defendant.'"[7] However, the Court explained that the class definition could be cured on remand by eliminating the controversial phrase.[8]

The Court also agreed with Allied's argument that the term "loan-related services" was not sufficiently definite.[9] The Court explained that the lack of specificity created an indeterminate class definition that did not comport with the requirement of a definite, ascertainable class.[10] However, the Court suggested that the indefiniteness could be overcome by allowing class counsel to amend its motion for class certification to state separately those fees and services for which class certification is sought.[11]

The Court then rejected Allied's conflict of interest allegations.[12] The Court explained that the fact that one of the class attorneys is a brother-in-law of a named plaintiff is insufficient, in and of itself, to show inadequate representation of the class as a whole.[13] The Court noted that the question is a case-by-case determination of "whether the named representative has, or may develop during the course of litigation, any conflicts of interest that will 'adversely affect the interests of the class.'"[14] The Court rejected the use of a blanket rule and held that the circuit court did not abuse its discretion in finding that Plaintiffs and Plaintiffs' counsel could adequately represent the class.

II. Legal Background

A. Class Definiteness

In Missouri, a court's decision to certify a class action is subject to the requirements of Supreme Court Rule 52.08.[15] Although not explicitly stated, Rule 52.08 implies that class certification is only proper where a sufficiently definite class exists.[16] To be sufficiently definite, a class must "be ascertained by reference to objective criteria."[17] The class must not be "'amorphous, vague, or indeterminate.'"[18] The class must be such that it is "'administratively feasible to determine whether a given individual is a member of the class.'"[19]

A class certification that requires a determination of the merits is not a proper under Rule 52.08.[20] Such is not "permitted because the trial court has no authority to conduct an essentially binding preliminary inquiry into ultimate liability issues when it is making the threshold, procedural determination of class membership."[21] "Additionally, including a merit determination in a class definition is problematic because such findings are 'not accompanied by the traditional rules and procedures applicable to civil trials,' and such tentative findings, lacking such safeguards, 'may color the subsequent proceedings and place an unfair burden on the defendant.'"[22]

B. Adequate Representation

For certification of a class action to be proper there must be a finding that "'the representative parties will fairly and adequately protect the interests of the class.'"[23] "'This prerequisite applies both to the named class representatives and class counsel.'"[24] "In determining whether the adequacy prerequisite is satisfied as to the class representative…the trial court must consider whether the named representative has any conflicts of interest that will 'adversely affect the interest of the class.'"[25] Missouri does not follow a blanket rule that "class attorneys and their relatives can never act as class representatives."[26] Instead, adequacy of representation is such instances will be determined on a case-by-case basis.[27]

III. Commentary

The Court's opinion concerning class "definiteness" did not divert from existing case law. However, the Court's opinion expanded its definition of "adequacy of representation" to include the idea that a class attorney and a class representative that are related can adequately represent a class. This was a question of first impression that expands upon prior case law.

- Michael S. Smith

[1] No. SC88273 (Mo. Jan. 15, 2008) (en banc), available at http://www.courts.mo.gov/file.jsp?id=26567.  The West reporter citation is Vandyne v. Allied Mortgage Capital Corp., 242 S.W.3d 695 (Mo. 2008) (en banc).
[2] Id. at *1.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id. at *2.
[10] Id.
[11] Id.
[12] Id. at *2-3.
[13] Id.
[14] Id. at *2.
[15] Id. at *1 (citing State ex rel. Union Planters Bank, N.A. v. Kendrick, 142 S.W. 3d 729, 735 (Mo. 2004) (en banc)).
[16] Dale v. DaimlerChrysler Corp., 204 S.W. 3d 151, 177-178 (Mo.App. 2006).
[17] Id. at 178.
[18] Kraft v. Philip Morris Cos., Inc., 190 S.W. 3d 368, 387 (Mo.App. 2005).
[19] Id.
[20] Vandyne, 2008 WL 132498 at *1.
[21] Id. (citing Dale, 204 S.W. 3d at 178).
[22] Id. (citing Craft v. Philip Morris Cos., Inc., 190 S.W. 3d 368, 377 (Mo.App. 2005).
[23] Id. at *3.
[24] Dale v. DaimlerChrysler Corp., 204 S.W. 3d 151, 172 (Mo.App. 2006) (quoting Union Planters Bank, N.A. v. Kendrick, 142 S.W. 3d 729, 735-36 (Mo. 2004 (en banc)).
[25] Id. at 172-73 ((quoting Union Planters Bank, N.A. v. Kendrick, 142 S.W. 3d 729, 735-36 (Mo. 2004 (en banc)).
[26] Vandyne, 2008 WL 132498 at *3 (citing Dale v. DaimlerChrysler Corp., 204 S.W. 3d 151, 172 (Mo.App. 2006)).
[27] Id. at *3 (citing Dale v. DaimlerChrysler Corp., 204 S.W. 3d 151, 172 (Mo.App. 2006)).

Research Sources on Topic:

Dale v. Daimler Chrysler Corp., 204 S.W. 3d 151 (Mo.App. 2006) (holding that a class representative who was related to an employee of a class attorney was not a violation of the adequacy requirement of Supreme Court Rule 52.08).

State ex rel. Union Planters Bank, N.A. v. Kendrick, 142 S.W. 3d 729 (Mo. 2004) (en banc) (discussing requirements for class certification).

15 Michael D. Murray, Missouri Practice Civil Rules Practice § 52.08-11 (3d ed. 2005 and Supp.) (discussing requirements for certifying class action).