The Third Circuit recently ruled in Grandalski v. Quest Diagnostics, Inc., that the common law claims in a nationwide class action were not appropriate for class treatment because the court would be required to conduct an individual analysis and application of each state’s law and therefore common questions of law did not predominate. 767 F.3d 175 (3d Cir. 2014).
Plaintiffs in Grandalski, a group of patients, filed a putative class action alleging that Quest Diagnostics, Inc. routinely overbilled patients. Id. at 177. Plaintiffs proposed two nationwide litigation classes and asserted multiple causes of action against both classes including a state law claim for consumer fraud. Id. at 178. Plaintiffs moved for class certification on all its claims for both its nationwide classes. Id.
The Third Circuit’s Decision
When faced with a nationwide class action alleging state law claims, courts must engage in a choice of law analysis to determine what state law should be used to substantively decide the legal issues. Consistent with choice of law tenets, courts apply the choice of law rules of the forum state to determine the controlling law. Applying New Jerseys conflicts of laws, the Grandalski court found that these factors weighed in favor of applying the laws of the putative class members’ home state law because the plaintiffs received and acted in reliance on the representation in their home state. Id. at 182. Accordingly, the consumer fraud laws of several states would have to be analyzed and applied to resolve the plaintiffs’ consumer fraud claim on a class wide basis.
After determining that the laws of several states would need to be applied, the Grandalski Court considered whether plaintiffs’ claim were appropriate for class treatment pursuant to Federal Rule of Civil Procedure 23. The Grandalski court determined that “class litigation involving dozens of state consumer fraud laws was not viable and that common facts and common course of conduct did not predominate.” Id. at 184. Accordingly, the court affirmed the district court’s denial of certification as to the state law consumer fraud claims. Id.
The plaintiffs in Grandalski proposed grouping together the laws of various states as an alternative to denying certification, however, the court found that the plaintiffs failed to demonstrate how the grouping it proposed would apply to the facts and issues presented in the case and failed to meet their burden of demonstrating that grouping was warranted and workable. Id. at 183. The court noted that this was a heavy burden and that in cases where a grouping proposal was accepted the plaintiff set for a comprehensive analysis of the various states’ laws potentially applicable and how the proposed grouping would work and no such analysis was provided by plaintiffs. Id. (citations omitted). Because plaintiffs “provided no indication as to how the jury could be charged in some coherent manner” relative to the proposed grouping and instead asserted only that the differences between the state laws within each group were “insignificant or non-existent,” the court rejected the proposed grouping. Id. at 183-84.
Grandalski adds to the growing trend among federal courts which have ruled that the predominance and superiority requirements of Rule 23 cannot be met where the substantive law of several different states would need to be applied. It also reaffirms that plaintiffs bear a heavy burden to articulate alternative frameworks, such as grouping, in order to stave off denial of class certification. In this way, Grandalski and several other federal courts have raised the bar for plaintiffs seeking class certification as they have become increasingly more focused on the manageability of a class action where multiple state laws are at issue.