CPLR § 901 Prerequisites to a class action
CPLR § 902 Order allowing class action
Globe Surgical Supply v GEICO Ins. Co., 2008 NY Slip Op 10583 (App. Div., 2nd)
On March 3, 2006, Globe moved, inter alia, pursuant to CPLR 901 and 902
for class certification on behalf of a class of all persons who had
reimbursement payments of claims for medical equipment and supplies
subject to former Part E adjusted or reduced by GEICO to an amount less
than the amount charged in the proof of claim,[FN3]
specifically to a "reasonable reimbursement of 150%" of either the
"industry average" or "of the average retail price." GEICO opposed the
motion. The Supreme Court denied the motion and, upon granting that
branch of Globe's subsequent motion which was for leave to reargue,
adhered to the original determination.
Article 9 of the CPLR is to be "liberally construed" (Beller v William Penn Life Ins. Co. of N.Y., 37 AD3d 747, 748; Wilder v May Dept. Stores Co., 23 AD3d 646, 649; Jacobs v Macy's E, Inc., 17 AD3d 318, 319; Kidd v Delta Funding Corp., 289 AD2d 203; Friar v Vanguard Holding Corp., 78 AD2d 83, 91; see generally 3 Weinstein Korn & Miller, New York Civil Practice CPLR, Lexis-Nexis
(MB)(2008) at 901.04, 901.05, and 901.20) in favor of the granting of
class certification if all of the prerequisites of CPLR 901(a)(1)-(5) (see Matter of Colt Indus. Shareholder Litig., 77 NY2d 185, 194; Klein v Robert's Am. Gourmet Food, Inc., 28 AD3d 63, 69; Ackerman v Price Waterhouse, 252 AD2d 179, 191; Friar v Vanguard Holding Corp., 78 AD2d at 90-91) and CPLR [*5]902(1)-(5) (see Ackerman v Price Waterhouse, 252 AD2d at 191) are met.
The prerequisites articulated in CPLR 901(a) include proof that the
proposed class is so numerous that joinder of all members is
impracticable, that common questions of law and fact applicable to the
class predominate over questions affecting only individual members,
that claims or defenses of the representative parties are typical of
the claims or defenses of the class, and that the class action is
superior to other available methods for the fair and efficient
adjudication of the controversy.
The proposed class action must also meet the prerequisites of
CPLR 902(1)-(5). The relevant factors articulated in CPLR 902(1)
("[t]he interest of members of the class in individually controlling
the prosecution or defense of separate actions"), CPLR 902(2) ("[t]he
impracticality or inefficiency of prosecuting or defending separate
actions") and CPLR 902(3) ("[t]he extent and nature of any litigation
concerning the controversy already commenced by or against members of
the class") may, under the circumstances of this case, be subsumed
under the prerequisite of superiority (see CPLR 901[a]). CPLR
902(4) requires consideration of "[t]he desirability or undesirability
of concentrating the litigation of the claim in the particular forum."
On a motion for class certification, the court must be convinced that the proposed class is capable of being identified (see Colbert v Rank Am., 1 AD3d 393, 394-395; Lichtman v Mount Judah Cemetery, 269 AD2d 319, 320-321; Mitchell v Barrios-Paoli, 253 AD2d 281, 291; Canavan v Chase Manhattan Bank, 234
AD2d at 494). Here, the class has been clearly defined as "all persons
who had reimbursement payments of claims for medical equipment and
supplies subject to [former] Part E of the Twenty-Third Amendment to
Regulation No. 83 (11 NYCRR 68) adjusted or reduced by GEICO based upon
an industry average' to a reasonable reimbursement of 150%' of the
industry average' or of the average retail price,' to an amount less
than the amount charged in the proof of claim."
CPLR 901(a) provides that a class action may be maintained if, inter
alia, "(1) the class is so numerous that joinder of all members,
whether otherwise required or permitted, is impracticable." GEICO did
not challenge numerosity in its opposition to Globe's original motion,
but instead first raised the issue in its opposition to Globe's motion
for leave to reargue. As such, GEICO has waived any challenge to
numerosity (cf. Friar v Vanguard Holding Corp., 78 AD2d at 96).
[T]he courts have uniformly certified breach of contract class actions, notwithstanding differing individual damages (see discussion
below on damages within the context of the requirements of CPLR
901[a]), where, as here, there is uniformity in contractual
agreements and/or statutorily imposed obligations. (I took out the cites).
This Court held, in Friar v Vanguard Holding Corp. (78 AD2d
at 97), that the determination of whether there is a common
predominating issue of fact or law should be based on "whether the use
of a class action would achieve economies of time, effort, and expense,
and promote uniformity of decision as to persons similarly situated" (id. at 97).
GEICO contends that the following individual issues predominate
over any common questions of law or fact: (1) whether GEICO had
individual defenses to the various claims of putative class members,
based on the timeliness of its coverage determinations or lack of
coverage in the first instance, (2) whether the DME claims arose from a
fraudulent accident, (3) whether the DME class member can prove its
"documented costs," and (4) individual damages.
[C]ontrary to GEICO's contention, it follows that, in the instant
case, GEICO would not be able to present a defense based on fraudulent
billing or the inability of the class members to establish "documented
costs." In the proposed class action it is clear that the factor common
to all potential class members is that the DME claims were denied
because GEICO found them to be in excess of the industry average. As
this Court and the Court of Appeals have made clear, overbilling and
invoice recycling do not give rise to a lack of coverage defense.
GEICO's failure to claim the fraud defenses within the required 30-day
period thus precludes it from raising it in the class action (see e.g. Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312).
Globe correctly contends that the potential for different
individual damages claims is not a valid reason for denying class
action status, because damages are easily calculated based on the
information contained in the denial-of-claim forms. GEICO argues that
the calculation of damages is not subject to a simple formula, and that
the trier of fact will have to determine if each claim is excessive or
if it meets 150% of documented costs. Contrary to GEICO's assertions,
the calculation of individual damages within a breach of contract class
action is not dispositive of the issue of class certification, and is
clearly manageable in the instant controversy (see Englade v HarperCollins Publs., 289 AD2d 159, 160 ["That individual authors may have differing levels of damages does not defeat class certification"]; Broder v MBNA Corp., 281 AD2d 369, 371 ["particular damages of each individual class member can be easily computed"]; Godwin Realty Assoc. v CATV Enters., 275
AD2d 269, 270 ["To the extent that there may be differences among the
class members as to the degree in which they were damaged, the court
may try the class aspects first and have the individual damage claims
heard by a Special Master"]; see also Weinberg v Hertz Corp., 116 AD2d 1, 6-7, affd 69 NY2d 979; LaMarca v Great Atl. & Pac. Tea Co. Inc., 16 Misc 3d 1115[A], *3, affd 55 AD3d 487; Matter of Arroyo v State of New York, 12 Misc 3d 1197[A], *4; Cox v Microsoft Corp., 10 Misc 3d 1055[A], *5; Matter of Coordinated Tit. Ins. Cases, 2 Misc 3d 1007[A]; Gilman v Merrill Lynch, Pierce, Fenner & Smith, 93 Misc 2d 941, 944; Guadagno v Diamond Tours & Travel, 89 Misc 2d 697, 699).
CPLR 901(a)(3) provides that the "claims and defenses of the
representative parties are typical of the claims or defenses of the
class." Typical claims are those that arise from the same facts and
circumstances as the claims of the class members (see Ackerman v Price Waterhouse, 252
AD2d at 181 [claims "arose out of the same course of conduct and are
based on the same theories as the other class members, they are plainly
typical of the entire class"]; Pruitt v Rockefeller Ctr. Props., 167 AD2d 14, 22; Friar v Vanguard Holding Corp., 78 AD2d at 99; Galdamez v Biordi Constr. Corp., 13 Misc 3d 1224[A]; Cox v Microsoft Corp., 10 Misc 3d 1055[A], *2; Fiala v Metropolitan Life Ins. Co., NYLJ, June 2, 2006, at 22, col 1). Typicality can overlap with the predominance of common questions of law or fact (see CPLR 901[a]) and the adequacy of representation (see CPLR 901[a]; Matter of Coordinated Tit. Ins. Cases, 2 Misc 3d 1007[A], *12; 3 Weinstein Korn & Miller, New York Civil Practice, CPLR at 901.24).
The three essential factors to consider in determining adequacy of
representation are potential conflicts of interest between the
representative and the class members, personal characteristics of the
proposed class representative (e.g. familiarity with the lawsuit and his or her financial resources), and the quality of the class counsel (see generally Ackerman v Price Waterhouse, 252 AD2d at 179; Pruitt v Rockefeller Ctr. Props., 167 AD2d at 25-26; Matter of Coordinated Tit. Ins. Cases, 2 Misc 3d 1007[A], *12).
Therefore, Globe failed to show that it is an adequate
representative of the class. "Other [appellate courts] emphasize, as do
we, the challenge presented by a defense unique to a class
representative—the representative's interest might not be aligned with
those of the class, and the representative might devote time and effort
to the defense at the expense of issues that are common and controlling
for the class" (Beck v Maximus, Inc., 457 F3d 291, 297). In
other words, a class should not be certified if Globe is the class
representative, as "there is a danger that absent class members will
suffer if their representative is preoccupied with defenses unique to
it" (Hanon v Dataproducts Corp., 976 F2d 497, 508 [internal citations omitted]; see Koos v First Natl. Bank, 496 F2d 1162, 1165; Folding Cartons, Inc. v America Can Co., 79 FRD 698; Weisman v Darneille, 78 FRD 669, 671; Di Pace v Linsco/Private LedgeR Corp., 2004 WL 1410046 [Cal App 2004]; Benzing v Farmers Ins. Exch., 179 P3d 103 [Colo App 2007], cert grantedP3d, 2008 WL 434677 [Colo 2008]; cf. LaMarca v Great Atl. & Pac. Tea Co. Inc., 16 Misc 3d 1115[A]; Galdamez v Biordi Constr. Corp., 13 Misc 3d 1224[A], affd 50 AD3d 357).
CPLR 901(a)(5) provides that a class may be certified only if "a
class action is superior to other available methods for the fair and
efficient adjudication of the controversy." The No-Fault Law provides
claimants with the option of commencing a plenary action or submitting
the dispute to arbitration (see Insurance Law § 5106[b]). In
addition, the No-Fault Law provides that the claimant may recover
penalty interest at a rate of 24% (see Insurance Law § 5106[a]), a remedy [*11]not
available in a class action. However, the availability of an
arbitration alternative does not mean such a proceeding is superior to
a class action which, through the aggregation of many similar claims,
provides an incentive to the legal profession to expend the resources
necessary to fully litigate often complex cases such as the instant
matter, including the pursuit of this very appeal. The "very core of
the class-action mechanism is to overcome the problem that small
recoveries do not provide the incentive for any individual to bring a
solo action prosecuting his or her rights" (Amchem Products, Inc., v Windsor, 521 US 591, 617; see Pruit v Rockefeller Ctr. Props., 167 AD2d at 21; Super Glue Corp. v Avis Rent A Car Sys., 132 AD2d 604, 607-608; Yollin v Holland Am. Cruises, 97 AD2d 720, 721; Friar v Vanguard Holding Corp., 78 AD2d at 98-99; Matter of Arroyo v State of New York, 12 Misc 3d 1197[A], *6; see also Bell v Superior Court, 69
Cal Rptr 3d 328, 349 [Cal App 2007]). In addition, should individual
class members wish to pursue arbitration, and thereby recover statutory
penalties unavailable in a class action, they may do so by opting out
of the class sought to be certified (see Cox v Microsoft Corp., 8 AD3d at 40; Ridge Meadows Homeowner's Assn. v Tara Dev. Co., 242 AD2d 947, 947; Super Glue Corp. v Avis Rent A Car Sys., 132 AD2d at 606).
Moreover, as with the requirements of CPLR 901(a)(2), referable
to the issues of liability and damages calculations, the prosecution of
this proposed class action is fairly straightforward and quite
manageable. Thus, although the motion to certify a class was properly
denied because of Globe's inadequacy as a class representative, upon
reargument, the denial of the motion should have been without prejudice
The bold is mine. I took out some of the longer string cites.