Stammco, L.L.C. v. United Tel. Co. of Ohio

2013 Ohio 3019, 994 N.E.2d 408, 136 Ohio St. 3d 231
Ohio Supreme Court·Decided July 16, 2013·No. 2012-0169·Published·Cited by 68 cases

Opinions

[232]*232Kennedy, J.

I. Introduction

{¶ 1} In this opinion, we address a single proposition of law of appellants, United Telephone Company of Ohio (“UTO”) and Sprint Corporation.1

{¶ 2} UTO appeals from a judgment of the Sixth District Court of Appeals holding that the trial court abused its discretion in denying certification of plaintiffs’ class-action lawsuit. We accepted for review the following proposition of law: “A trial court does not abuse its discretion by evaluating the merits of the plaintiffs’ claims when denying class certification.”

{¶ 3} We hold that a trial court must conduct a rigorous analysis, which may include probing the merits of plaintiffs’ claims, to ensure that the prerequisites of Civ.R. 23 are satisfied. Even though the trial court’s consideration of the merits here was improper, its order denying certification of the class was correct because plaintiffs’ proposed amended class does not satisfy the prerequisites of Civ.R. 23. Therefore, we reverse the judgment of the court of appeals and reinstate the order of the trial court that rejected plaintiffs’ amended class definition, which in effect decertifies plaintiffs’ class-action lawsuit.

II. Facts

{¶ 4} In 2005, Stammco, L.L.C., a limited-liability company, and Stammco’s owners, Kent and Carrie Stamm, on behalf of other similarly situated telephone customers, filed a complaint seeking to certify a class-action lawsuit against UTO.

{¶ 5} UTO provided plaintiffs with local and long-distance phone service. In their amended complaint, plaintiffs alleged that their phone bills from UTO also contained unauthorized charges from third parties, as part of a practice known as “cramming.” Plaintiffs’ amended complaint alleged three theories of liability: (1) negligent billing, (2) “breach of the duty of good faith and fair dealing implied in contract,” and (3) unjust enrichment. Plaintiffs sought injunctive relief and compensatory damages. Plaintiffs proposed the following class definition:

[233]*233All individuals, businesses or other entities in the State of Ohio who are or who were within the past four years, subscribers to local telephone service from United Telephone Company of Ohio d.b.a. Sprint and who were billed for charges on their local telephone bills by Sprint on behalf of third parties without their permission. Excluded from this class are defendants, their affiliates (including parents, subsidiaries, predecessors, successors, and any other entity or its affiliate which has a controlling interest), their current, former, and future employees, officers, directors, partners, members, indemnities [sic], agents, attorneys and employees and their assigns and successors.

{¶ 6} The trial court certified the class as defined. UTO appealed. The court of appeals affirmed the trial court’s judgment certifying the class, but only under Civ.R. 23(B)(3). Stammco, L.L.C. v. United Tel. Co. of Ohio, 6th Dist. No. F-07-024, 2008-Ohio-3845, 2008 WL 2939455, ¶ 66-67.

{¶ 7} On appeal, we held that the class definition failed to readily identify prospective class members because (1) it was unclear whether class members were expected to give UTO or the third parties authorization to bill, or whether the third parties were expected to obtain authorization from class members, (2) it was unclear in the phrase “their permission” whom the word “their” referred to, and (3) it was unclear how authorization would occur. Stammco, L.L.C. v. United Tel. Co. of Ohio, 125 Ohio St.3d 91, 2010-Ohio-1042, 926 N.E.2d 292, ¶ 10 (“Stammco I ”). We also held that the class was not readily identifiable, because individualized determinations would be needed as to “whether and how each prospective class member had authorized third-party charges on his or her phone bill” and the identification of class members would require “more than a reasonable effort.” Id. at ¶ 11.

{¶ 8} Accordingly, we reversed the judgment of the court of appeals and remanded the cause to the trial court to “redefine the class on remand.” Id. at ¶ 12. However, we noted that we did not reach UTO’s arguments that the class was a fail-safe class,2 that individualized issues predominated in the class, that the [234]*234class was unmanageable, and that the class was not suitable for the issues in the case. Id. at ¶ 13.

{¶ 9} On remand, plaintiffs proffered the following amended class definition:

All individuals, businesses or other entities in the State of Ohio who are or who were within the period four years prior to the initiation of this lawsuit to the present, subscribers to local telephone service from United Telephone Company of Ohio d.b.a. Sprint and/or any successor company providing that same service, and who were billed for third party charges as to which Sprint had no prior authorization from the customer in writing or by a method acceptable to Sprint sufficient for Sprint to verify that the customer had agreed to such charge. Excluded from the class are those customers who subscribed to and provided authorization for long distance services from a provider of toll services that were billed on the customers’ local telephone bills. Also excluded from this class are defendants, their affiliates (including parents, subsidiaries, predecessors, successors, former and future employees, officers, directors, partners, members, indemnities [sic], agents, attorneys and employees and their assigns and successors).

{¶ 10} After the hearing, the trial court issued a decision that stated: (1) “[T]he ‘class definition,’ as submitted by the Plaintiffs is a prohibited ‘fail-safe class,’ ” (2) “Plaintiffs [sic] action has been brought against the ‘local exchange carrier,’ rather than the culprit ‘third party provider,’ ” and (3) “The action proposes to impose a ‘duty’ upon the Defendant Carrier, that is not required of them, according to the status of current legislation and case law.” Consequently, the court held: “[T]he Plaintiffs have not met their burden of establishing, by a preponderance of the evidence, that a ‘class certification,’ is a proper one,” and it denied the plaintiffs’ amended motion for class certification.

{¶ 11} Plaintiffs appealed. The court of appeals held that the amended class definition addressed the ambiguities in the class definition as found by this court. Specifically, the court of appeals stated:

The amended class now defines to whom permission is to be granted: appellee, whose permission was required: the customer, and the manner [in which] the permission was to be granted: in writing or an alternative method by which appellee could verify agreement. The amended definition deletes any reference to customers who receive unauthorized charges. In our view, the amended language satisfies the specific concerns of the court in its mandate for remand.

[235]*2352011-Ohio-6503, 2011 WL 6352306, ¶ 39.

{¶ 12} The court held that the amended class definition did not set forth a fail-safe class, because the amended class definition did not rely upon a determination of liability. Id. at ¶ 42-46.

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Stammco, L.L.C. v. United Tel. Co. of Ohio, 2013 Ohio 3019, 994 N.E.2d 408, 136 Ohio St. 3d 231 (Ohio 2013).

2013 Ohio 3019 (Stammco, L.L.C. v. United Tel. Co. of Ohio) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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