Baker vs. GoHearing on Motion for Class Certification

Adams County District Court17th Judicial District

Division CCivil Action 07 CV 543

The Honorable John E. Popovich

CRCP 23(a) Standards

1. Numerosity

2. Commonality

3. Typicality

4. Adequacy

Must consider the essential elements of theparties claims and defenses in order to

determine whether class should be certified

The Bakers’ Claims

• Dealer Handling Charge is illegal• Dealer Handling Charge constitutes the

“unauthorized practice of law” and therefore violates the Colorado Consumer Protection Act

• Dealer Handling Charge is unconscionable under the Uniform Consumer Credit Code

• Money Had and Received

The Bakers’ Claims

All of the Bakers’ claims are based on thesame premise:

The Dealer Handling Charge constitutes the unauthorized practice of law.

The Go Dealerships Do Not Charge For the Preparation of

Documents

• There is no evidence that the Go Dealerships charge for the preparation of documents

• The Bakers do not dispute this fact

• The Unauthorized Practice of Law claims are therefore a red herring

The Go Dealerships Do Not Charge For the Preparation of

Documents (continued)

• The disclosure language used (and required by the Assurance of Discontinuance) states that it is a charge for a cost “such as”…

• Demonstrative language• No requirement to charge for items listed• The Go Dealerships do not allocate any

portion of the Fee for preparing documents

Go Dealerships Defenses

• Do not charge for preparing documents• Practice is permitted by “Assurance of

Discontinuance” issued by Colorado Attorney General

• Completion of documents is not unauthorized practice of law

• No “money had and received” claim when express contract

• Voluntary Payment by proposed class

Bakers’ Theory

• Activity is unconscionable because of Unauthorized Practice of Law (UPL)

• An essential element of Bakers’ UPL claim is that Go Dealership Defendants charged for the preparation of documents

• This theory fails because the undisputed evidence is that Go Dealership Defendants did not charge for the preparation of documents

• Therefore the Bakers can only proceed on their alternative theory

Bakers’ Alternative Theory

• The activity is deceptive under the CCPA because the Go Dealership Defendants state that they charge for something that they do not

• The Disclosures state that the fee is “…costs and additional profit to the seller for items such as…”

• Such As means “of a kind or character about to be indicated, suggested, or exemplified” (i.e. an example)

• Inquiry will have to be made as to each individual’s understanding of the Disclosures

• Factual issue predominate over common issues, if any, with respect to Plaintiffs’ Alternative Theory

Elements of a CCPA Claim

• (1) that the defendant engaged in an unfair or deceptive trade practice;

• (2) that the challenged practice occurred in the course of defendant's business

• (3) that it significantly impacts the public as consumers of the defendant's goods or services,

• (4) that the plaintiff suffered damages; and • (5) that the challenged practice caused the plaintiff's

damages.Crowe v. Tull, 126 P.3d 196, 201 (Colo. 2006)

Plaintiff must show:

GO Dealerships Defenses to Class Certification

• Arbitration and Class Waiver• Go Dealerships did not act on behalf of

consumers• Individual issues predominate on all claims• UCCC claim requires consumer credit and

excludes cash deals and business vehicles• Damages • 23(b) issues: No injunctive relief and individual

claims are superior

History of Dealer Handling Charges In Colorado

• The Colorado Attorney General began an investigation in the late 1970s

• Lead to the creation of an “Assurance of Discontinuance” under CRS § 6-1-110.

• Requires disclosure to consumers

• Followed by Go Dealerships

First Requirement Under 1979 AOD

Second Requirement Under 1979 AOD

Attorney General Suthers’ 12/10/2007 Policy Guidance

Bakers’ Purchase Agreement and AOD Language

(emphasis added)

Colorado Law on the Unauthorized Practice of Law

• No Colorado Case recognizes a private cause of action for damages for the unauthorized practice of law

• All reported decisions involve claims for injunctive and/or declaratory relief only

Newman vs. Bozarth: Judge Kane’s View of

UPL• Did the Defendant give any explanation or

advice about the documents?• Are the documents “necessary and

essential” to Defendant’s business?• Did the Defendant charge a fee?• Would the public interest be served by

stopping the practice?• Was the Defendant a party to the

documents it was preparing?

Representation

• Essential question for any UPL claim

• Bakers testified that they knew that the Go representatives were not acting on their behalf

• Same questions would have to asked of every class member

Did the Defendant undertake any representation

of the Plaintiff?

State-Mandated Disclosure Form

Bakers’ Purchase Agreement

“Purchaser is encouraged to review this Purchase Agreement (including the Additional Terms and Conditions set forth on the reverse side hereof) carefully and seek independent professional advice if Purchaser has any questions concerning this transaction.”

Arbitration and Class Waivers

• Virtually the entire proposed class signed the Arbitration Agreement that includes a Class Action Waiver

• Colorado law favors arbitration and permits class waivers

• No standing to challenge the unconscionability of the agreement

Lygas’ Arbitration Agreement

“By entering into this agreement, you give up your right to participate as a class representative or class member on any claim you may have against Dealership including any right to class arbitration or consolidation of individual arbitrations.”

Bakers’ Arbitration Agreement

(“Customer refused to sign”)

Elements of Class Certification

• C.R.C.P. 23(a)

– Numerosity

– Commonality

– Typicality

– Adequacy• Of Representative• Class Counsel

• C.R.C.P. 23(b)(2)

– Injunctive Relief

• C.R.C.P. 23(b)(3)

– Predominance

– Superiority

Class Definition

• Colorado Residents When? – At the time of transaction?– At the time of filing of the lawsuit or at the time class

is certified? – No matter which time is used factual investigation is

necessary.

• “Consumers”– CCPA and UCCC conflict– CCPA is available to “person” but UCCC is only

available to “consumers”.

Class Definition-SubclassUCCC Definition of “Consumer”

• “Consumer means a person other than an organization who is the buyer, lessee, or debtor to whom credit is granted in a consumer credit transaction.”

• “Consumer Credit Sale” credit sale to a person other than an organization for goods “purchased primarily for personal family, or household purpose….”

C.R.S. § 5-1-301(10)and (11)(emphasis added)

Numerosity• The use of sales volume alone cannot

support a numerosity finding• Bakers’ class definition does not exclude

any potential class members– Who signed the arbitration agreements– Who bought vehicles through wholesale broker

transactions, fleet transactions, and employee-manufactured purchase program

– Who are commercial buyers– Who paid cash and therefore are not covered by the

UCCC– Who are no longer Colorado residents

Commonality

– Did the Defendants undertake to represent each member of the class?

– Did each member of the class rely on any alleged representation made by the Defendants?

The unauthorized practice of law analysis requires an individualized analysis

Commonality (continued)

• Did each member of the class sign an arbitration agreement?– The proposed class makes no distinction for

those that did

• Is each member of the class a “consumer” under the UCCC?– The proposed class makes no mention of

businesses that bought cars or individuals who bought cars for business purposes and therefore are not subject to the UCCC.

Typicality

1. did not sign the arbitration agreement2. did not rely on any alleged representations made by

the defendants3. were not represented by the Defendants 4. have no actual damages5. are subject to the voluntary payment defense6. dismissed their UCCC/TILA claim

The Bakers are atypical of their proposed class because they:

Damages

• The CCPA prohibits statutory damages in class actions. C.R.S. § 6-1-113(2)

• Cost of preparing the Bakers’ vehicle for resale exceeded the Dealer Handling Fee Paid-No actual damages

• Go Dealerships do not charge any amount for preparation of documents

• Bakers’ damages are not typical• No typical damage calculation

Adequacy

1. The Bakers cannot devote the time necessary to vigorously prosecute this case

2. Stacy Baker failed to appear at her deposition3. The Bakers do not effectively communicate with their Class

Counsel4. Judge Shaffer’s finding on the Bakers’ adequacy5. The Bakers’ Counsel have never reviewed the Defendants’

deal files 6. No pursuit of Lygas’ claims in arbitration7. No pursuit of discovery on summary judgment8. Lygas’ claim withdrawn without consideration of

unconscionability

The Plaintiffs Are Inadequate Class Representatives because:

The Bakers’ Response to the Summary Judgment Motion

• The Bakers’ response to the summary judgment motion stated that they have the right to discovery about whether any oral representations inconsistent with the Assurance of Discontinuance were made

• This inquiry would have to be made on an individual basis – what representations were made and did each individual rely on those representations

Rule 23(b) Analysis

• Primary thrust of case is damages• Only claim for injunctive or declaratory

relief is in WHEREFORE clause of First Amended Complaint

• CCPA does not permit a private litigant to pursue injunctive relief

• Individual issues predominate over common issues

• Individual CCPA actions far superior

Conclusion

• The Go Dealerships do not charge a fee for preparing documents.

• The Dealer Handling Fee is charged pursuant to an Assurance of Discontinuance.

• UPL requires more than preparation of documents and a fee – it requires representation.

Conclusion (continued)

• Go Hyundai Mazda did not represent the Bakers.

• Arbitration Agreement with Class Prohibition precludes class certification.

• Bakers have no actual damages.

• CCPA prohibits statutory damages in class actions.

Conclusion (continued)

• Class definition is fundamentally flawed– Colorado residents – When?– CCPA ‘”person” vs. UCCC “consumer”– UCCC business vs. personal use

• Individual issues of arbitration, consumer definition, and representation destroy commonality

Conclusion (continued)

• Issues of arbitration, damages, voluntary payment and dismissal of TILA claim demonstrate that Bakers’ claims are atypical

• Primary thrust of the Bakers claim is money damages, not injunctive or declaratory relief

• Individual issues predominate over common issues and individual claims are far superior.

Thank you.