i4 ^%3? ^:l^^l IN THE SUPREME COURT OF OHI CASE NO. 13-1130 On Appeal from the Ninth Appellate District Lorain County, Ohio Court of Appeals Case No. 12CA010178 LYNN A. STRICKLER, et al. Plaintiff.'s-Appellees vs. FIRST OHIO BANC & LENDING, et al. Defendants-Appellafats iviotion FOR RECONSIDERATION Clifford C. Masch, Esq. (0015737) George S. Coakley, Esq. (0020419) REMINGER CO., L.P.A. 101 West Prospect Avenue, Suite 1400 Cleveland, Ohio 44115-1093 Telephone: (216) 687-1311 Counsel, for Def'endants-Appellants First Ohio Banc & Lending, Inc. & Western Surety Corrzpany Lee M. Brewer, Esq. Justin D. Owen, Esq. ALBER CRAFTON 501 W. Schrock, Suite 104 Westerville, OH 43081 Counsel_foY Defendant-Appellant Capitol indejnnity Corporation Thamas R. Theado (0013937) Gary, Naegele & Theado, LLC 446 Broadway Avenue Lorain, Ohio 44052 Telephone: 440-244-4809 - _:..^.,-=--- Jack Malicki Law Office of Jack Malicki, LLC 230 Third Street Elyria, Ohio 44035 Tel ephoiie: 440-284-1601 Counsel.for Appellees Lynn A. Strickler and Keith Krese F!;,.^.^ 0 C " 'j s. ) ;. ii,,tsr ^...,,:;.,r., ;..,4^.,,, '
Now comes appellants, First Ohio Banc & Lending, Inc. and Western Surety Company, by and through counsel, and pursuant to Supreme Court Rule of Practice 18.02, respectfully requests that this Court reconsider the decision not to accept this matter for discretionary review. Appellants submit that the holding and reasoning espoused by the underlying court in affirniing the trial court's certification of a class action cannot be reconciled with two recent holdings by this court which were issued after appellants filed their memorandum in support of jurisdiction. The underlying appellate court's holding and analysis profoundly deviates from the principles set forth by this court in Stammco,. LLC v. Zlnited Tel. Co. of Ohio (2013) 131 Ohio St.3d 221 and Cullen v. State Farm Nlut. Ins. Co. (2013), 2013-Ohio-4733 ' that equity and justice compel the acceptance of the issues outlined in appellants' memorandum in support of,jurisdiction, or, in the alternative, the remand this matter back to the Ninth District Court of Appeals with instructions to conduct a review which is commensurate with the holdings in Starrameo and Cullen. The appellate court's holding conflicts with these decisions as set foi-th below. 1. THE UNDERLYING APPELLATE COURT'S CONCLUSION THAT IN CONTEXT OF CONSIDERING THE PLAINTIFF'S SATISFACTION OF CIV. R. 23(A) CRITERIA, A COURT MUST ACCEPT THE ALLEGATIONS IN THE PLAINTIFFS' COMPLAINT AS TRUE 64WITHOUTCONSIDERING THEIR MERITS" IS WHOLLY INCONSISTENT WITH THE STANDARD OF REVIEW SET FORTH IN ST^9MMCC1, LLC v. UNITED TEL. CO. OF OHIO. Pursuant to this court's recent decision in Stammco, it is now clear that a trial court is required rigorous analysis of the plaintiff's class action claim in order to verify that the Civ. R. 23 requirements have been met should include consideration of the merits of the plaintiff's claim to the extent that the merits impact the Civ. R. 23 requirements. Appellants advocated this standard of review when they challenged the plaintiffs' class action certification both before the The Stammco and Cullen decisions were both announced after appellants filed their memorandum in support of this appeal. 1
trial court and the court of appeals. At both levels, appellants argued that plaintiffs could not establish the requisite elements of standing under Civ. R. 23(A) because of a lack of any evidence that either the proposed party representatives and/or the proposed class members sustained any "actual" injury causally related to an alleged violation of R. C. 1322.11, the civil action upon which plaintiffs sought to predicate their class action claim. Througllout the course of this litigation, Appellants have maintained that the civil remedy set forth in R.C. 1322.11 for a violation of certain sections of the Ohio Mortgage Broker's Act is limited to a buyer actually injured by a violation. Based upon the express language of R.C 1322.11, only "a buyer injured by a violation" has standing to pursue the civil remedy set forth in the statute. Appellants argued that R.C. 1322.11 was not a strict liability statute and that proof of actual "injury"wa.s a predicate to standing requirement to participate in the civil remedy created under this statute. Along the sanle lines, appellants also argued that the actual "injury" standing requirement under R.C. 1322.11 effectively negated the plaintiffs' efforts to establish a "common basis for liability" as required under Civ. R. 23(A), absent individualized proof of injury among the proposed representatives or of the proposed class members. See Ojalvo v. Bd. of Trustees af Ohio State (1984), 12 Ohio St.3d 230, 232. However, when appellants advocated these arguments on appeal, the Ninth District Court of Appeals affirmed the trial court's holding on standing and commonality under Civ. R. 23(A), reasoning that: Strickler and Krese's complaint set forth: (1) that they both received disclosure statements from First Ohio during the class period, as did other members of the class; (2) that First Ohio's disclosure statements violated R.C. 1322.06 and (3) that as a result of the violation(s) "each member of the Class (including Lynn Strickler and Keith Krese) was actually injured and suffered damages." It also set forth several common questions of law, including whether First Ohio's disclosure statements complied with R.C. 1322.062 and whether First Ohio was liable for the non-complying statements. (See Hamilton at 77) (If there is a***, common liability issue, the [commonality] rule is satisfied."). The trial court was required to review the allegations in the complaint as true without considering their merits. 2
Hill, 2009-Ohio-4614 at 118... To the extent their argument truly addressed standing and commonality, it is overruled. The remaining arguments exceed the scope of this appeal, as they are merit-based arguments that do not address the appropriateness of class certification. (The March 29, 2013 appellate court decision, pgs. 6-7). (Emphasis added). Simply stated, the underlying appellate court's treatment of the allegations set forth in the plaintiffs' complaint as unchallengeable in the context of a class action certification determination cannot be reconciled with this court's pronouncement in Stammco. Not only does the appellate court improperly conclude that it could not consider "merit-based" arguments in the context of determining the plaintiffs' satisfaction of the requisite Civ. R. 23 elements, but the court actually held that it was required to accept all allegations in a plaintiffs complaint as true "without consideriiig their merits." This holding not only applies an improper standard of review in the case at bar, but stands as precedent for a plaintiff to obtain class action certification by doing nothing more than affirmatively pleading each of the Civ. R. 23 requirements in the complaint. If the complaint allegations cannot be challenged, the class certification process is effectively over. In light of the appellate court's improper conclusion that courts are required to view the allegations in the plaintiff s complaint as true "without considering their merits," appellants would respectfully request that this court either accept jurisdiction of its appeal for purposes of reviewing assignment of No, 1, or, in the alternative, remand this matter for further review by the Ninth District Court of Appeals with the instruction that it apply a proper standard of review as more recently clarified in the Stammco. II. WIIEN A TRIAL COURT'S DETERMINATION THAT A PLAINTIFF HAS SATISFIED THE CIV. R. 23 REQUIREMENTS OF STANDING AND COMMONALITY ARE BASED ON A LEGAL INTERPRETATION OF THE CLASS ACTION CIVIL REMEDY, AN APPELLATE COURT MUST CONSIDER THE MERITS OF THE TRIAL COURT'S LEGAL INTERPRETATION AS IT IMPACTS THE RULE 23 REQUIREMENTS. 3
In presenting plaintiffs' class action claim before the trial court, plaintiffs did not present any evidence that either the proposed class representatives and/or the proposed class members sustained actual "injury" causally related to any alleged deficiency in any of First Ohio's disclosure fornls. Rather, the plaintiffs argued, and the trial court agreed, that the referenee in R.C. 1322.11 to "a btiyer injured by a violation" did not require a claimant to prove the existence of an actual injury causally related to a violation. The trial court interpreted this statutory language to mean that if First Ohio omitted any of the statutorily required infornnation in a disclosure form, the loss of the required information (i.e. the violation) is the injury which gives rise to a buyer's standing to pursue a civil remedy under R.C. 1322.11. Thus, the trial court held "[t]he requirement that a person be `injured' does not require more. It limits standing to bring such claims and as affected consumers, plaintiffs have been injured and therefore have standing." (The trial court's judgment entry dated 10/6/11). Despite the fact that the trial court's interpretation of R. C. 1322.11 was integral in the its analysis of the requisite Civ. R. 23 elements, the appellate court refused to consider appellants' challenges to the trial court's statutory interpretation based solely on the perceived conclusive nature of the plaintiff'spleadings. As the trial court's legal construetion of R.C. 1322.11 created the very foundation of its ruling on the requirement of standing and commonality under Civ, R. 23(a), the appellate court was required, under Starnryzco, to evaluate the trial court's interpretation on review. Clearly, the plaintiffs position as to the requisite degree of proof necessary to establish "injury" under R.C. 1322.11 goes to the heart of their satisfaction of the requisite Civ. R. 23 elements. Accordingly, the court should accept jurisdiction of this appeal and address appellant's second assignment of error No, 2, or, in the alternative, remand this matter back to the Ninth District Court of Appeals for further review. 4
III. WHEN A CLASS ACTION IS PREMISED UPON A CIVIL REMEDY WHICH IS EXPRESSLY LIMITED TO "BUYERS INJURED BY A VIOLATION," THERE CAN BE NO COMMON ISSUE OF LIABIALITY CAPABLE OF BEING RESOLVED AMONG THE PROPOSED CLASS MEMBERS AS REQUIRED UNDER THE PREDOMINANCE REQUIREMENT SET FORTH IN CIV. R. 23(B)(3).2 In Cullen v. State Farm Mut. Auto Ins. Co., 2013-Ohio-4733, this court reviewed a situation wherein a plaintiff sought to satisfy the predominance requirement under Civ. R. 23(B)(3) by advocating that this requirement would be satisfied if the court adopted the plaintif#'s theory of the case, not upon a preponderance of the evidence. In Cullen, the trial court held that the plaintiffs satisfied the predominance requirement under Civ. R. 23(B)(3), reasoning: "if Cullen 's theory of tlae case is believed, the use of a common plan to steer claimants to opt for repair rather than replacement or disclosure of a cash payment for the value of the glass, less deductible, is a significant class wide issue. Cullen at T 31. (Emphasis in original). In rejecting this analysis, this court reasoned in Cullen as follows: A colorable claim does not satisfy the requirements of Civ. R. 23. Nor can compliance with the r«le be presumed from the allegations in a complaint. Rather, in this instance, Cullen had to demonstrate, and the trial court had to find, that questions common to the class in fact predominate over individual ones, and proof of predominance necessarily overlaps with proof of the merits in this case. Because the appellate court rejected any consideration of the underlying merits, it did not review whether the trial court conducted a rigorous analysis or whether suffcient evidence supported the trial court's finding. Id, at ^ 34. (Emphasis in original) Similar to the plaintiff in Cullen, the plaintiffs in the case at bar have sought to satisfy their Civ. R. 23(B)(3) requirements of predominance and superiority, by relying on their theory of the case that proof of the injury requirement set forth in R.C, 1322.11 is satisfied by merely demonstrating that a particular disclosure form did not contain the requisite information. Under this theory of the case, the loss of the required information is the "injury" which gives rise to a 'The appellate court's review of Civ. R. 23(B) factors was limited to Civ. R. 23(B)(3). 5
party's standing to participate in a class action claim under R.C. 1322.11. This holding has effectively read the language "a buyer injured by a violation" out of R.C. 1322.11 and transformed this civil remedy into a strict liability statute where statutory damages, including the statutory minimum damages set forth therein, arise upon mere proof of a violation. Appellants respectfully submit that the underlying analysis by the trial court and appellate court contravenes this court's holding in Cullen. Clearly the court's analysis of the Civ, R. 23(B)(3) requirement was preniised on the acceptance of the plaintiffs' legal interpretation of R.C. 1322.11. Under Cullen, the appellate court was required to determine whether a plaintiff has satisfied this requirement by the requisite preponderance of the evidence standard, not merely accept the plaintiffs theory of the case based on the complaint allegations alone. A court must review the merits of the legal principle, and based on this review, then determine if the plaintiffs has established the predominance requirement by the requisite burden of proof. Cullen at ^30. IV. CONCLUSION For all the foregoing reasons, appellants respectfulty submit that the underlying appellate court's decision contravenes this court's holding in Stainrnco and Cullen. This decision, if left to stand, constitutes precedent for the recognition of a class action based on nothing more than the unassailable allegations in a plaintiffs complaint. It also stands as authority for the recognition of a class action under R.C. 1322.11 and other similarly worded statutes despite the fact that the plaintiffs failed to submit proof of any actual injury, tn light of the foregoing, the holding in this case has far wider implications. Not only does the statute at issue in this case require that in order to bring a claim under R.C. 1322.11, a plaintiff must suffer an actual injury by reason of a violation(s) of the statute so too does the Ohio Credit Card Recording Act, R.C. 1349.18(C) 6
(which provides that "a buyer injured by a violation of this section has a cause of action and is entitled to the same relief available to a consumer under 1345.09 of the revised code,"); the Ohio Valentine Act under R.C. 1331.08 (which provides that "the person injured in the person's business or property of another person by reason of anything forbidden or declared to be unlawful in those sections may sue thereafter in any court having jurisdiction and venue thereof;") and the Ohio Credit Services Organization Act (which provides "a buyer injured by violation of 47.12.01, 247.1214 of the Revised Code may bring an action for the recovery of damage."). The holding in this case constitutes authority that these similarly worded statutory consumer remedies are likewise strict liability statutes imposing liability based solely on proof of a mere violation, not an actual injury. For all the foregoing reasons, appellants respectfillly request that this court either accept jurisdiction of the propositions of law outlined in appellant's memorandum in support of jurisdiction, or, in the alternative, remand this matter back down to the Ninth District Court of Appeals with instructions that it provide a review in compliance with this court's holdings in Stammco and Cullen. Respectfully submitted, b AI`" 1 Clifford C. Masch, Esq. (0015737) George S. Coakley, Esq. (0020419) REMINGER CO., L.F.A. 101 West Prospect Avenue, Suite 1400 Cleveland, Ohio 44115-1093 Counsel for De. feudants Appellants First Ohio Banc & Lending, Inc. & Western Sua ety Company 7
CERTIEICATE OF SERVICE A copy of the foregoing was sent regular U.S. mail, on or about this December, 2013, to: day of Thomas R. Theado, Esq. Gary, Naegele & Theado, LLC 446 Broadway Avenue Lorain, Ohio 44052 Jack Malicki, Esq. Law Office of Jack Malicki, LLC 230 Third Street, 2nd Floor Elyria, Ohio 44035 Attorneysfor Plaintiffs Lee M. Brewer, Esq. Justin D. Owen, Esq, ALBER CRAFTON 501 W. Schrock, Suite 104 Westerville, OH 43081 Counsel for Defendant-Appellant Capitol Indemnity Corporation Clifford C. Masch, Esq. George S. Coakley, Esq. Counsel for Defendants-Appellants First Ohio Banc & Lending, Inc. & Western Surety Company 8