CPLR § 901 Prerequisites to a class action
Yeger v E*Trade Sec. LLC, 2009 NY Slip Op 06077 (App. Div., 1st, 2009)
In April 2008, Justice Cahn granted class certification and found the Yegers to be proper class representatives.
Noting that the "minuscule" nature of the damages sought did not
bar the claim, the court found the requisite class action element of
commonality based on the allegations that "the same practices were
done" to all members of the class. Aware that plaintiffs had accepted a
refund, the court stated there were "other deductions from the account
for [m]aintenance [f]ees which plaintiffs contend were deducted early
and which were not returned or accepted." After motion practice about
the proper term of the class period, the parties eventually stipulated,
without prejudice to this appeal, to a class period "commencing with
the third quarter of 2003 and ending with the fourth quarter of 2003"
as to all customers charged an AMF "in violation of their customer
agreement."The Appellate Division may exercise de novo review of a class
certification decision, "even when there has been no abuse of
discretion as a matter of law by the nisi prius court" (Small v Lorillard Tobacco Co., 94 NY2d 43, 53 [1999]). To determine whether a lawsuit [*3]qualifies
as a class action, a court applies the five criteria of CPLR 901(a)
(numerosity, commonality, typicality, adequacy of representation and
superiority) to the
facts (see Hazelhurst v Brita Prods Co., 295 AD2d 240, 242 [2002])[FN1].
"[T]hat wrongs were committed pursuant to a common plan or pattern does
not permit invocation of the class action mechanism where the wrongs
done were individual in nature or subject to individual defenses" (Mitchell v Barrios-Paoli, 253 AD2d 281, 291 [1999]).Whether E*Trade's conduct in assessing AMFs a day early caused
an individual class member to suffer actual damages depends upon facts
so individualized that it is impossible to prove them on a class-wide
basis. The motion court concluded that class certification was
appropriate because there was a common question as to whether E*Trade
collected the AMF too early, ie, before the date permitted in E*Trade's
contracts. However, this is only half the question. A breach of
contract claim only exists if E*Trade's common conduct actually damaged
a customer. Therefore, to recover, each class member would have to show
that he or she would have avoided the fee had E*Trade collected it at
the proper time. There were several actions that customers could have
taken to avoid the assessment (such as depositing additional funds or
executing additional securities trades), as well as other conditions
not under their control that could have prevented it, such as when
E*Trade, as a courtesy, refunded those customers who paid the AMF. It
is this aspect of proof that would be subject to a host of factors
peculiar to the individual. This aspect of proof is critical. To allow
the Yegers, or any class member, to recover the fee merely because
E*Trade collected it early—without proof that each member of the class
would have taken steps to avoid the fee had collection occurred at its
proper time—would result in a windfall to those plaintiffs who would
not have taken corrective action. In certain cases, it could also
result in writing the AMF out of the agreement entirely, a fee the
parties had agreed to freely. Accordingly, individualized issues,
rather than common ones, predominate (CPLR 901[a][2]).
In addition, plaintiffs are not proper class representatives
because their rejection of E*Trade's offer to refund the fee renders
their claim atypical (CPLR 901[a][3]). We have considered the
plaintiffs' remaining contentions and find them unavailing.
The bold is mine.
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