Opinion
Case No. 2:98CV-0779ST.
June 9, 2000.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The Court has considered the arguments and evidence submitted related to Plaintiffs' Motion for Class Certification and has concluded that the Motion should be granted. Considering the arguments and evidence, the Court makes the following findings of fact and conclusions of law:
I. FINDINGS OF FACT
Any conclusions of law set out in section II deemed to be findings of fact are incorporated in this section I.
Numerosity
1. Approximately 240-245 retail grocery stores were customers of Fleming Companies, Inc.'s ("Fleming") Salt Lake City distribution center during the relevant period starting in 1983 or early 1984, when Fleming implemented its own pricing system for products purchased from its Salt Lake City Distribution Center, until such time as each purchaser converted to Fleming's Flexible Marketing Plan in 1995. (See Plaintiffs Motion, Exhibit A; statement by counsel for Defendants during certification hearing.) These are the potential plaintiff class members.
2. These retail grocery stores are or were dispersed geographically throughout Utah, Nevada, Idaho, and Wyoming, with a small number of stores also in Arizona and Oregon. ( See Id.)
3. Many of these retail grocery storca arc or were relatively small stores located in rural communities.
4. Even assuming that the eight purported "release agreements' signed by Fleming's current customers and offered as evidence by Fleming in opposition to class certification are valid, there still remain more than 230 potential class members located in at least 4 states. Accordingly, joinder of all of the absent class members in not practicable.
Commonality
5. The Defendants, through counsel, have conceded that the requirement of Rule 23(a)(2)-that there be questions of law or fact common to the class — is met.
6. The findings discussed below related to Rule 23(b)(3)'s predominance requirement also support the finding of commonality.
Typicality
7. The named Plaintiffs' claims in this litigation are essentially the same as the claims of the absent class members and are based on the same primary factual circumstances. More specifically, the Defendants' marketing and implementation of Fleming's "cost plus fixed fee plus freight" or "Cost Plus" sell plan was the same or essentially the same with respect to the named Plaintiffs and the Plaintiff class members.
8. Plaintiffs Storehouse Markets, Inc., Daflin's Storehouse Markets, Inc., and RR Storehouse, Inc. (collectively "Dallins") allegedly suffered the same type of injury as each one of the other class members, despite the fact that Dallins may not have purchased all or even most of their products from Fleming. Dallins' purchases of more than $50 million from Fleming during the relevant class period were subject to the same alleged common course of conduct centered around the "Cost Plus" sell plan as were the purchases of the other Plaintiff class members.
9. Dallins' purported knowledge of various cost savings buying techniques commonly used in the grocery supply industry does not negate the underlying contractual breaches and misrepresentations allegedly made to the Plaintiff class regarding Fleming's pricing plan and practices. Thus, this purported knowledge does not render Dallins an atypical representative.
10. Plaintiff Weiser Food Corp. ("Weiser") also allegedly suffered the same type of injury as each of the other class members, and the status of Weiser as an "equity store" does not make it an atypical class representative. Fleming provided no evidence that, based on two members of Weiser's board being employees of Fleming, Weiser had greater knowledge with respect to Fleming's "Cost Plus" sell plan. Rather, Fleming has acknowledged that grocery supplies were marketed and sold to "equity stores" in the same way that they were marketed and sold to independent stores.
II. The presence of an arbitration clause in Weiser's 1993 Supply Agreement does not make Weiser an atypical class representative. The Plaintiffs have constructed their class definition to exclude all purchase contracts subject to mandatory arbitration clause, and the Magistrate Judge assigned to the case has previously ruled that Weiser's claims not based on the 1993 Supply Agreement are not subject to the arbitration clause.' Thus, Weiser's claims subject to arbitration, as well as any other similar claims possessed by other absent class members, are specifically excluded from the class definition and will not present unique issues with respect to the claims subject to class-wide resolution.
12. The named Plaintiffs' claims (the individual claims of the Dallins and Weiser Plaintiffs) are based on the same legal theories as those of the absent Plaintiff class members.
Adequacy of Representation
13. Plaintiffs' class counsel are sufficiently competent to conduct the proposed litigation. Fleming does not contest tbe adequacy of class counsel. Brent Hatch, Mark James and Mark Clements of Hatch James, P.C. and Orrin Harrison and Bill Sims ofvinson Elkins L.L.P. are experienced in complex litigation, including class actions.
14. The named Plaintiffs have a sufficient interest vigorous advocacy. in the outcome of this action to ensure vigorous advocacy.
15. There is no relevant or sufficient antagonism or conflict between the interests in this litigation of Fleming's current customers and the interests of its former customers. Under Plaintiffs' allegations, both former and present customers would have a presently existing claim for monetary damages for alleged overcharges, and each class member has aligned interests with the remainder of the class in the pursuit and recovery of damages for those claims.
Predominance of Common Class-Wide Issues
16. Questions of law or fact common to members of the class predominate over any questions affecting only individual members. Specific common class-wide issues of fact and law in this case include:
a. Whether Fleming breached identical or similar contracts with each member of the Plaintiff class regarding the price at which Fleming agreed to sell groceries and related products;
b. whether Defendants have, over a period of many years, knowingly and intentionally engaged in a series of fraudulent schemes for the purpose of overcharging the Plaintiff class for groceries and related products;
c. whether Defendants have, over a period of many years, knowingly and intentionally made materially false and misleading representations to the Plaintiff class for the purpose of inducing them to purchase groceries and related products from Fleming;
d. whether Defendants have, over a period of many years, fraudulently concealed material information from the Plaintiff class for the purpose of inducing them to purchase groceries and related products from Fleming;
e. whether Defendants made representations to Plaintiffs that Fleming would sell groceries to Plaintiffs at Fleming's cost plus a set markup, and at the time of these representations Defendants did not intend to perform the promise and made the representation for the purpose of deceiving Plaintiffs;
f. whether Fleming's alleged conduct violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") 18 U.S.C, §§ 1961 — 1968; C g. whether Fleming maintained two sets of books regarding its costs for groceries: one that reflected Fleming's actual cost and one that did not reflect Fleming's actual cost;
h. whether Fleming employed various accounting and "kick-back" schemes to hide its actual cost of groceries from the Plaintiffs, including
(1) improper markups resulting from "transfer" of products among other Fleming Divisions; (2) Fleming's failure to properly pass through discounts and rebates from its suppliers; (3) Fleming's failure to pass on "forward" buying discounts; (4) overcharges resulting from diverting practices by Fleming; (5) overcharges from a scheme known as "buy from retail;"(6) overcharges from inflated invoices that did not reflect Fleming's actual cost; (7) overcharges relating to "slotting fees;" and (8) other overcharges that were disguised within the financial records that purportedly represented Fleming's actual cost;
i. whether Fleming's allegedly deceptive and dishonest conduct with regard to the pricing of its wholesale groceries and related products breached its obligation of good faith and fair dealing, including because Defendants' alleged conduct denied Plaintiffs a reasonably expected benefit of the bargain;
j. whether Fleming's allegedly deceptive and dishonest conduct with regard to the pricing of its wholesale groceries and related products breached to obligation of good faith and fair dealing because, among other things, Fleming's alleged conduct was inconsistent with the Plaintiffs' justified expectation that Fleming would supply groceries as agreed and represented;
k. whether Defendants' alleged misconduct caused injury to the business or property of the Plaintiff class and, if so, the appropriate class-wide measure of damages; and
l. whether the Defendants took steps to actively conceal their activities from discovery by the Plaintiff class,
17. Fleming has acknowledged that the same written "Cost Plus" sell plan, as existing from time to time, was used with all Plaintiff class members and that it was presented to them in generally the same way.( See Ned Julian deposition at 43-44, 61, 79; Defendants' Memorandum in Opposition to Plaintiffs' Motion for Class Certification at 3.). Thus, the Court finds that there was a common course of uniform conduct with regard to Fleming's presentation and sale of its "Cost Plus" pricing structure to all class members.
18. Fleming has also acknowledged that the pricing structure of the "Cost Plus" sell plan was implemented the same as to each Plaintiff class member. ( See Id.). Thus, the Court finds that there was a common course of uniform conduct with regard to Fleming's implementation of its "Cost Plus" pricing structure with regard to all class members.
19. The questions common to the class concerning the Defendants' common course of allegedly fraudulent conduct predominate any individual factual issues, including any related to oral representations, reliance, or damages.
Superiority of Class-Wide Resolution
20. In this case, a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
21. For small grocery stores located in rural areas, including many stores that no longer do business with Fleming and some that are no longer in business, a class action is likely to be the only effective mechanism, and certainly is the most efficient mechanism, for these stores to bring their claims against Defendants.
22. A class action is the most efficient and orderly mechanism for resolution of the issues and claims common to class members in this litigation.
23. This is the appropriate court in which to concentrate this litigation. The Fleming Distribution Center at the center of the controversy is located in Salt Lake City. Many of the documents and witnesses for both Plaintiffs and Defendants are located in this area.
II. CONCLUSIONS OF LAW
Any findings of fact set out in section I deemed to be conclusions of law are incorporated in this section II.
24. In requesting class certification, the plaintiff bears the burden of showing that the class should be certified and that the requirements of Rule 23 are met. Albertson's, Inc. v. Amalgamated Sugar Co., 503 F.2d 459, 463 (10th Cir. 1974). The court may only certify the class if it is satisfied that plaintiff has met the prerequisite requirements in Rule 23(a). General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 161 (1982). Under Rule 23(a). plaintiffs must establish four threshold requirements for class certification:
(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law and fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a); General Telephone, 457 U.S. at 161. If the plaintiff satisfies the prerequisites of Rule 23(a), it must then establish that the action on behalf of the class falls within at least one of the three categories listed in Rule 23(b). In this case, the Plaintiff class members assert that this case is properly certified under Rule 23(b)(3), which requires proof that the common class-wide issues of fact and law will predominate over individual issues and that a class action is superior to other judicial procedures potentially available to resolve the controversy. Fed.R.Civ.P. 23(b)(3).
25. This Court has broad discretion with regard to whether to certify a proposed class. Anderson v. City of Albuquerque, 690 F.2d 796, 799 (10th Cir. 1982). When in doubt, however, the Court should err on the side of class certification. Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir. 1 968) Q'if there is error to be made, let it be in favor and not against the maintenance of a class action"). The Court has not addressed the merits of the dispute in ruling upon Plaintiffs' motion to certify the class, and should not. Eisen v. Carlisle Jacquelin, 94 S.Ct. 2140, 2152 (1974)("nothing in either the language or history of Rule 23 . . . gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action"); Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir. 1988).
26. Numerosity. The test for numerosity is that joinder of the class members must be impracticable. Fed.R.Civ.P. 23(a)(1). There is no need to demonstrate that joinder is impossible — only that it is impracticable. Commander Properties Corp. v. Beech Aircraft Corp., 164 F.R.D. 529, 535 (D. Kan. 1995). Generally, the Plaintiff must show that joinder is impracticable based on factors such as the size of the class, nature of the action, size of the individual claims, inconvenience of trying individual suits, and other factors. The Fifth Circuit recently held that a class of 100 to 150 persons from a single state was sufficient to meet the nuinerosity requirements. Mullen v. Treasure Chest Casino, LLC,F.3d 620, 624 (5th Cir. 1999). In that case, the court cited with approval a treatise that suggests any class consisting of more than forty members "should raise a presumption that joinder is impracticable" and the numerosity requirement is met. See Id. citing Newburg on Class Actions "§ 3, 05, at 3-25 (3d ed. 1992). In this case, the class consists of more than 230 grocery stores located in at least four states. The Court concludes that joinder of all class members is clearly impracticable.
27. Commonality. Rule 23(a)(2) requires that there be questions of law or fact common to the class. This requirement is similar to the "predominance of common class-wide issues of law and fact" included as part of class certification under Rule 23(b)(3), but the commonality requirement under Rule 23(a)(2) is much less stringent. Indeed, federal courts have held that a single common issue of fact or law is sufficient to meet the commonality standard. See e.g. Baby Neal for and by Kanter v. Casey, 43 F.3d 48, 56 (3rd Cir. 1994); Garner v. Healy, 184 F.R.D. 598, 601 (RD. I11. 1999). A common nucleus of operative fact based on the defendants' alleged wrongful conduct is generally sufficient to satisfy the commonality requirement. See Garner, citing Rosaria v, Livaditis, 963 F.2d 1013, 1018 (7th Cir. 1992). In this case, the commonality requirement is met based on Defendants' common course of conduct in the presentation, sale, and implementation of its "Cost Plus" program to market grocery products to the Plaintiff class members. Plaintiffs have alleged that this common course of conduct underlies all of their causes of action. Singer v. ATT Corp., 185 F.RD. 681, 688 (S.D. Fla. 1998) ("courts have held that where a common scheme of deceptive conduct is alleged, common questions of law and/or fact will exist"). The Court concludes that the crux of this case is whether Defendants did or did not misrepresent their costs to Plaintiffs. This common course of conduct provides (as described above) numerous questions of law and fact common to the class.
28. Typicality. Rule 23(a)(3) requires that the claims or defenses of the representative parties are typical of the claims or defenses of the absent class members. The typicality requirement
is intended to assess whether the named plaintiffs have incentives that align with those of the absent class members so as to assure that the absentee's interests will be fairly represented. Baby Neal, 43 F.3d at 57. The Tenth Circuit has recognized that class certification is appropriate under the typicality standard notwithstanding differences among the factual situations of individual class members "so long as the claims of the plaintiff and the other class members are based on the same legal and remedial theory." Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir. 1988); Penn v. San Juan Hospital, 528 F.2d 1181, 1189 (10th Cir. 1975); McEwen v. Digitran Systems, Inc., 160 F.R.D. 631, 636 (D. Utah 1994). The Court concludes that the individual claims of the representative Plaintiffs are based on the same legal theory and the same general factual circumstances as those of the absent class members, and accordingly the named Plaintiffs' claims are typical of the claims of the class.
29. Adequacy of Representation. Rule 23(a)(4) requires that the representative parties must fairly and adequately protect the interests of the class. This requirement is assessed based on two factors:(1) whether plaintiffs' attorneys are sufficiently competent to conduct the proposed litigation, and(2) whether plaintiffs have interests which are antagonistic to those of the class. McEwen v Digtran Systems, 160 F.R.D. at 637. As noted above in the findings of fact, the Court concludes that the named representative Plaintiffs and Class Counsel will fairly and adequately protect the interests of the class. Moreover, the Court finds that the named class representatives do not have any individual interests or claims that create a conflict with the absent class members that they seek to represent.
30. Predominance of Common Class-Wide Issues of Fact and Law. For a class action certified under Rule 23(b)(3), "questions of law or fact common to members of the class [must] predominate over any questions affecting only individual members." FED. R. Civ. P. 23(b)(3). The predominance inquiry focuses on whether the efficiencies gained in resolving the common issues together are outweighed by the individual issues presented for adjudication. In re Prudential Ins. Co. of America, 962 F. Supp. 450, 11 (D.N.J. 1997), aff'd 148 F.3d 283 (3d Cir. 1998). Predominance does not imply that individual issues cannot exist. All class members do not need to be identically situated upon all issues, so long as their claims are not in conflict with one another and the common issues outweigh the individual ones. Cannon v. Cherry Hill Toyota, Inc., 184 F.R.D. 540, 545 (D.N.A 1999).
31. There are essentially two different types of claims at issue in this litigation, the fraud/RICO claims and the breach of contract/breach of duty of good faith and fair dealing claims. Both groups of claims are predicated on the same alleged uniform course of conduct by Fleming in which Fleming allegedly misrepresented its pricing structure to the Plaintiff class. This is the crux of the case, and represents the predominant unifying issue. Numerous contested class-wide fact issues arise from this one concept, including: (1) Defendants' alleged creation of two sets of financial records including a set of records that were deceptive to the Plaintiff class, (2) varioas mechanisms allegedly employed by Defendants to conceal or falsify its true or actual cost for grocery products, (3) use of the same "Cost Plus" sell plan for all members of the Plaintiff class, and (4) Defendants' allegedly uniform representations to Plaintiffs regarding the basis for the cost of grocery products. Similarly, related class-wide law issues apply uniformly to the class, such as the application of Fleming's duty of good faith and fair dealing and whether Fleming's alleged conduct was inconsistent with the Plaintiffs' justified expectation (based on this duty) that Fleming would supply groceries at its actual cost plus a set fee. The Court finds that common class-wide issues of fact and law will predominate over individual issues.
32. Fleming raises several objections to the conclusion that common class-wide issues of fact and law predominate. For example, Fleming argues that this case involves individual questions of reliance and that precludes a finding that common c]ass-wide issues predominate. Nevertheless, the clear conclusion from the case law is that, where defendants have engaged in an alleged common course of fraudulent conduct, the presence of individual questions as to the reliance of each plaintiff does not preclude the court finding that common questions of law and fact predominate. In re Prudential Ins. Co. of America Sales Practice Litig., 148 F.3d 283, 3 14-15 (3d Cir. 1998). Moreover, many of Plaintiffs' causes of action do not contain a reliance requirement (e.g. breach of contract). The Court concludes that questions of individual reliance are secondary to the liability issues that arise from Fleming's uniform presentation of its "Cost Plus" program, and that any individual issues can be reasonably addressed following resolution of the primary classwide issues.
33. Defendants also allege that this case is inappropriate for class certification because "the fraud claims are based on numerous and varied oral representations." Defendants' Memorandum at 23. However, Fleming stated in its brief that it was "Fleming's ordinary course and practice to present the "Cost Plus" sell plan. . . to each of Fleming's customers." Id. at 3. The clear implication is that Fleming's sales presentations were uniform, consistent presentations based on a set group of scripted materials. This implication is reinforced by the testimony of Ned Julian (noted above in the findings of fact) that the "Cost Plus" sell plan was presented in essentially the same way to each potential customer. The applicable ease law demonstrates that fraud and RICO causes of action based on these kinds of uniform misrepresentations are appropriate for class-wide resolution.2 The Court concludes that common class-wide issues of fact and law predominate in this case.
34. Superiority of the Class Action Device. Rule 23(b)(3) also requires that "the class action is superior to other available methods for the fair and efficient adjudication of the controversy." FED. R. Civ. P. 23(b)(3). The rule sets out four factors relevant to this inquiry: "(A) the interest of the members of the class in individually controlling the prosecution or defense of separate actions;(B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (0) the difficulties likely to be encountered in the management of a class action." Id. The Court concludes that all four of these factors support certification in this case,
35. In particular, the Court concludes that the small, independent grocers located in rural communities (who form the majority of this class) will likely have no other reasonable remedy for
the alleged wrongful conduct other than through certification of this class action. As the United States Supreme Court noted in Amchem, class certification is primarily concerned with the vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court. The Court believes this is such a case, and certification of the proposed class is necessary to give these grocers with limited resources a meaningful opportunity for redress of the alleged wrongful conduct by Fleming.
Therefore, Plaintiffs' Motion for Class Certification is granted.