McGlinchey Commercial Law Bulletin
Is my class action moot?Read Time: 8 mins
McGlinchey’s Commercial Law Bulletin is a biweekly update of recent, unique, and impactful cases in state and federal courts in the area of commercial litigation. We’re pleased to expand our Commercial Law Bulletin from its previous coverage of Ohio case law to include additional areas in McGlinchey’s footprint.
Gerace v. Biotheranostics, Inc., 8th Dist. Cuyahoga No. 110440, 2022-Ohio-302
In this appeal, the Eighth Appellate District affirmed the trial court’s decision, agreeing that an employer cannot be the defendant in a claim for tortious interference with an employment relationship and that the circumstances of the employee’s termination did not jeopardize Ohio’s public policy.
In brief: At issue in this dispute was whether the employer’s firing of its employee amounted to tortious interference with an employment relationship. In order to succeed on a claim for tortious interference with an employment relationship, a plaintiff must prove: “(1) the existence of an employment relationship between plaintiff and the employer, (2) the defendant was aware of this relationship, (3) the defendant intentionally interfered with this relationship, and (4) the plaintiff was injured as a proximate result of the defendant’s acts.” As noted by the appellate court, the tort of interfering with an employment relationship manifests a sufficiently clear public policy to satisfy the first element of a wrongful discharge in violation of public policy claim. That being said, the facts of this case did not jeopardize Ohio’s public policy against tortious interference with an employment relationship. Critically, an employer cannot be a defendant in a tortious interference claim. Rather, the three parties in a tortious interference claim are the plaintiff, the defendant, and the third-party employer. Here, the employee sued his employer instead of suing the director or the Cleveland Clinic. The appellate court also noted that Ohio has a clear public policy in favor of at-will employment. Consequently, terminating the employee under these circumstances did not jeopardize Ohio’s public policy against tortious interference and could not be the basis for wrongful termination in violation of Ohio public policy.
Class Certification Requirements
Shipp v. Norton Outdoor Advertising, Inc., 1st Dist. Hamilton No. C-210150, 2022-Ohio-216
In this appeal, the First Appellate District affirmed the trial court’s decision, agreeing that the trial court did not abuse its discretion in finding the plaintiffs failed to satisfy the Civ.R. 23(A) requirements and denying class certification when it refused to speculate as to the number of proposed class members given that the proposed class included only 23 residences within a 500-foot radius.
In brief: At issue in this case was whether the proposed class satisfied the numerosity requirement for class certification. Here, homeowners filed suit against a nearby property owner on whose land sat two, 14-feet-tall by 48-feet-wide variable message LED billboards, as well as the owner of the billboards, alleging nuisance. Specifically, they alleged the messages and colors on the LED billboards changed every eight seconds, resulting in frequent flashes of light in the neighborhood, constituting a nuisance. The homeowners sought the certify a class of “all owners, renters, and occupants of residential property located within a 500-foot radius” of the two LED billboards. The trial court denied the motion to certify, finding that the proposed class failed to satisfy Civ.R. 23(A) in that it lacked numerosity, typicality, commonality, and adequacy of representation. Pursuant to Civ.R. 23, there are seven requirements that must be satisfied for a trial court to grant class certification: “(1) an identifiable class must exist and the definition of the class must be unambiguous; (2) the named representatives must be members of the class; (3) the class must be so numerous that joinder of all members is impractical; (4) there must be questions of law or fact common to the class; (5) the claims or defenses of the representative parties must be typical of the claims or defenses of the class; (6) the representative parties must fairly and adequately protect the interests of the class; and (7) one of the three Civ.R. 23(B) requirements must be satisfied.”
Specifically at issue in this case was the numerosity requirement. “Civ.R. 23(A)(1) requires a class to be so numerous that joinder of all members is impracticable.” Although numerosity is determined based upon the facts of each case, the Ohio Supreme Court previously stated that proposed classes with “greater than 40 members likely satisfies numerosity, but less than 25 likely does not.” Moreover, “impracticability of joinder must be positively shown, and cannot be speculative.” Here, the plaintiffs’ proposed class included 23 residences within a 500-foot radius of the billboards. The plaintiffs argued that by assuming two occupants per residence, their proposed class had at least 46 members. Notably, the plaintiffs did not take affirmative steps to inquire as to how many occupants actually lived at each of the 23 residences. Rather, the plaintiffs provided support for their proposition that two people per residence was a suitable approximation solely by reference to the 2010 United States Census. Although reasonable inferences may be drawn in determining class size, the appellate court agreed that it was not unreasonable for the trial court to refuse to speculate as to the number of people per household, given that the proposed classes included only 23 residences within a 500-foot radius of the billboards. Further, it would not be difficult or inconvenient to identify and join all members of the proposed class. On the contrary, the plaintiffs agreed that the proposed class was easily identified and did not exceed 23 residences. If a party fails to satisfy even one of the requirements, class certification is not proper. Consequently, as the proposed class failed to meet the numerosity requirement and the plaintiffs failed to show that joinder was impracticable, the trial court properly denied class certification.
Mootness of Class Action
Jones v. Sharefax Credit Union, Inc., 1st Dist. Hamilton No. C-210260, 2022-Ohio-176
In this appeal, the First Appellate District agreed with the trial court that the plaintiff’s rejection of the defendant’s offer of “complete relief,” checks that fully satisfied plaintiff’s monetary demands, amounted to a rejection of a settlement offer; therefore, the offer had no operative effect and did not moot plaintiff’s claims.
In brief: In this matter, the plaintiffs purchased vehicles and obtained financing through retail installment sales contracts, which were assigned to the defendant. Following the plaintiffs’ defaults on their loans, the defendant repossessed the vehicles and sent the plaintiffs notices of sale and notices of deficiency. Thereafter, the plaintiffs filed suit, alleging violations of the Retail Installment Sales Act (RISA) and the Ohio Uniform Commercial Code related to the notices of sale and deficiency and alleging the sales of the vehicles were commercially unreasonable. The plaintiffs claimed that the defendant had issued the same defective “form” notices and engaged in commercially unreasonable sales in other repossession cases involving retail installment sales contracts. Therefore, they requested class-action certification of three classes of debtors similarly situated: the RISA class, the notice-of-sale class, and the notice-of-deficiency class. Prior to the class-certification hearing, the defendant submitted requests to the credit reporting agencies requesting that all negative reporting regarding the plaintiffs’ credit be removed. Further, the defendant filed notices waiving its right to collect any deficiencies and sent checks to the plaintiffs for monetary payment. Critically, the plaintiffs returned the checks back to the defendant. Nevertheless, the defendant filed a motion for summary judgment on the grounds of mootness, arguing it had provided complete relief to the plaintiffs. The trial court denied the defendant’s motion for summary judgment, as well as denied the class certification. On appeal, the plaintiffs argued their claims were not moot. Specifically, they argued their rejection of the checks equated to a rejection of the defendant’s offer to settle the case; therefore, complete relief was not provided.
This issue was previously addressed by the U.S. Supreme Court, which held that “an unaccepted offer of judgment cannot moot a case.” Pursuant to basic principles of contract law, “an unaccepted settlement offer – like any unaccepted contract offer – is a legal nullity, with no operative effect.” This is because the rejection of an offer “leaves the matter as if no offer had ever been made.” Here, the plaintiffs rejected the defendant’s offer and returned the checks. The parties were in the same position monetarily as they were before the offer was made. Therefore, the plaintiffs’ claims were not moot.
Safe Harbor Provision
Trident Asset Mgmt v. 2050 Condotel, No. 5D20-2130 (Fla. 5th DCA Feb. 4, 2022)
The Fifth District found error in the trial court’s award of damages in a Final Judgment of Foreclosure because the calculation under the safe harbor provision was made on a “per unit” basis.
In brief: The safe harbor provision under Florida Statute § 718.116(1)(b) limits the amount of liability of a first mortgagee or its successors and assigns who acquires title to a unit by foreclosure for unpaid assessments to either the unit’s unpaid common expenses and regular periodic assessments which accrued during the 12 months immediately preceding the acquisition of title and which have not been paid or “the lesser of … [o]ne percent of the original mortgage debt.” The amount is not calculated on a “per unit” basis. Rather, “one percent of the original mortgage debt” is the total amount of liability for all the condominium units subject to foreclosure.
At issue in this appeal is a promissory note in the amount of $300,000 which was secured by a mortgage to purchase 58 condominium units. The appellee brought a foreclosure action against the appellant, who became the owner of the units by virtue of a deed in lieu of foreclosure, to foreclose its lien against the units that resulted from unpaid assessments that came due before the appellant took title to the units. The appellant challenged the trial court’s calculation of damages under Florida Statute § 718.116(1)(b), which required the appellant to pay $3,000 per unit, resulting in the appellant owing the appellee $168,000. The Fifth District ruled that the trial court misinterpreted and misapplied the statute by calculating the “one percent of the original mortgage debt” on a “per unit” basis instead of as the total amount for all the units, noting that the Legislature would have included “per unit” in the statute if it intended for the amount to be calculated on a “per unit” basis. The Fifth District reversed the award of damages and remanded for the trial court to award the appellee a total of $3,000 for all 58 units.
NYC Const v. Jerome, No. 4D21-1143 (Fla. 4th DCA, Feb. 2, 2022)
The Fourth District found that a failure to appear at a hearing due to a calendaring error is the type of excusable neglect that warrants granting a motion for relief from judgment.
In brief: Florida Rule of Civil Procedure 1.540(b) allows a trial court to set aside a final judgment for excusable neglect. Excusable neglect is found where inaction results from an error or reasonable misunderstanding. It is well-supported under Florida law that a failure to appear due to a calendaring or clerical error is the type of excusable neglect that warrants relief under rule 1.540(b).
In this appeal, the appellant argued the trial court erred in denying its rule 1.540(b) motion to vacate based on excusable neglect. The motion sought to vacate a final judgment entered against the appellant after it failed to appear for a scheduled evidentiary hearing due to an inadvertent calendaring error. The trial court verbally denied the motion on the basis that “miscalendaring” the scheduled hearing did not constitute excusable neglect under rule 1.540(b)(1). No transcript of the hearing was taken. The Fourth District disagreed with the trial court’s decision, finding that the calendaring error, which was supported by the verified motion to vacate, and not contested by the appellee on appeal, satisfied the excusable neglect prong for relief under rule 1.540(b). Thus, notwithstanding the lack of the transcript, there was no factual dispute that the appellee was entitled to relief. The Fourth District reversed the final judgment and remanded with instructions that the trial court grant the motion for relief.
The Long-Arm Statute’s Connexity Requirement
Apollo v. BNP, No. 3D20-180 (Fla. 3d DCA Feb 2, 2022)
The Third District found that an executable interest in an asset located within Florida was sufficient to establish personal jurisdiction under Florida’s long-arm statute in an action to recover that asset in order to satisfy an out-of-state judgment.
In brief: A non-resident defendant is subject to the jurisdiction of a Florida court under Florida’s long-arm statute if it has sufficient minimum contacts with the State of Florida. Under the connexity requirement of Florida’s long-arm statute, a defendant’s conduct must occur in Florida and the plaintiff’s cause of action must arise from such Florida activity. In an action involving the satisfaction of a domesticated judgment, an executable property interest in an asset located in Florida satisfies the connexity requirement and is considered a sufficient minimum contact to confer personal jurisdiction under Florida’s long-arm statute.
In this case, the underlying proceeding involved artwork, which was being stored in Florida and was sought by the appellee to apply toward the satisfaction of a New Jersey judgment. The non-resident appellant appealed a temporary injunction issued by a Florida trial court which enjoined the appellant from obtaining the artwork. The Fourth District recognized that if a judgment debtor owns or maintains an executable interest in a certain asset that is located in Florida, the connexity requirement is met and a non-resident defendant having possession or control of the asset could reasonably anticipate being haled into a Florida court. The Fourth District ruled that the trial court must conduct a limited evidentiary hearing to determine the true owner of the artwork, and held that if the judgment debtor is the true owner of the artwork, the connexity requirement is satisfied and the appellant and its trustees, who store, maintain, and insure the artwork, may be impleaded in the action.