William Gray, III v. Hearst Communications, Incorpo
Filing
UNPUBLISHED AUTHORED OPINION filed. Originating case number: 8:08-cv-01833-GRA Copies to all parties and the district court/agency. [998663467].. [10-1302]
Appeal: 10-1302
Document: 40
Date Filed: 08/25/2011
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-1302
WILLIAM
B.
GRAY,
III,
d/b/a
Greenwood
Clinic
of
Chiropractic, individually and for the benefit and on
behalf of all others similarly situated; B AND K SERVICES
INCORPORATED,
Plaintiffs – Appellees,
and
STEVE WALL AND ASSOCIATES LLC, f/k/a SC Insurance Services
LLC, d/b/a Morgan and Associates Incorporated; UNLIMITED
SERVICES OF GREENWOOD INCORPORATED, individually and for
the benefit and on behalf of all others similarly situated,
Plaintiffs,
v.
HEARST
COMMUNICATIONS,
INCORPORATED;
HOLDINGS CAROLINA INCORPORATED,
WHITE
DIRECTORY
Defendants – Appellants,
and
TALKING PHONE BOOK; SAIA HOLDINGS LLC; SAIA PUBLISHING
COMPANY;
MICHAEL
BROWN;
WHITE
DIRECTORY
HOLDINGS
PENNSYLVANIA INCORPORATED; WHITE DIRECTORY OF CAROLINA,
INCORPORATED,
Defendants.
Appeal from the United States District Court for the District of
South Carolina, at Anderson.
G. Ross Anderson, Jr., Senior
District Judge. (8:08-cv-01833-GRA)
Appeal: 10-1302
Argued:
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Date Filed: 08/25/2011
December 7, 2010
Page: 2 of 17
Decided:
August 25, 2011
Before WILKINSON and SHEDD, Circuit Judges, and Norman K. MOON,
Senior United States District Judge for the Western District of
Virginia, sitting by designation.
Affirmed by unpublished opinion. Judge Shedd wrote the majority
opinion, in which Senior Judge Moon joined.
Judge Wilkinson
wrote a dissenting opinion.
ARGUED: Alan Mansfield, GREENBERG TRAURIG, LLP, New York, New
York, for Appellants.
Daniel S. Haltiwanger, RICHARDSON,
PATRICK, WESTBROOK & BRICKMAN, LLC, Barnwell, South Carolina,
for Appellees.
ON BRIEF: Stephen L. Saxl, William A. Wargo,
GREENBERG TRAURIG, LLP, New York, New York; R. Bruce Shaw,
Stephen G. Morrison, NELSON MULLINS RILEY AND SCARBOROUGH, LLP,
Columbia, South Carolina, for Appellants.
Terry E. Richardson,
Jr., Christopher J. Moore, RICHARDSON, PATRICK, WESTBROOK &
BRICKMAN, LLC, Barnwell, South Carolina; Jon E. Newlon, MCCRAVY,
NEWLON & STURKIE LAW FIRM, P.A., Greenwood, South Carolina, for
Appellees.
Unpublished opinions are not binding precedent in this circuit.
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SHEDD, Circuit Judge:
Hearst
Communications,
Inc.
and
White
Directory
Holdings Carolina, LLC (collectively “White Directory”) appeal
the district court’s order conditionally certifying class action
claims
against
them
for
breach
of
contract,
breach
of
the
implied covenant of good faith and fair dealing, and unfair and
deceptive trade practices. For the following reasons, we affirm
the certification order.
These claims, brought by William B. Gray, III, d/b/a
Greenwood Clinic of Chiropractic, and B & K Services, Inc., on
behalf of themselves and other similarly situated advertisers
(collectively “Gray”), stem from Gray’s purchase of advertising
in
The
Talking
Phone
Book
telephone
directories
which
are
published and distributed by White Directory in various markets
throughout
South
Carolina.
Gray
alleges
White
Directory
solicited the class members to enter into advertising contracts
through
the
Directory’s
Directory
use
of
superior
knowingly
concerted
sales
distribution
misrepresented
efforts
coverage,
its
touting
but
actual
that
White
White
distribution,
never made a full distribution as promised, and intentionally
sought to conceal this deception.
Gray initially asserted seven causes of action, but
eventually sought class certification on only three theories of
relief: breach of contract, breach of the implied covenant of
3
Appeal: 10-1302
good
Document: 40
faith
practices.
and
Date Filed: 08/25/2011
fair
After
dealing,
a
and
hearing
Page: 4 of 17
unfair
on
the
and
deceptive
motion
for
trade
class
certification, the district court entered an order conditionally
certifying all three class claims. White Directory timely filed
a
petition
for
review.
We
review
the
class
certification
decision for abuse of discretion. Brown v. Nucor Corp., 576 F.3d
149, 152 (4th Cir. 2009).
Although
White
Directory
raises
several
issues
on
appeal, the primary issue is whether the district court erred in
finding that Gray’s proposed class action claims satisfy the
commonality
Civil
and
predominance
Procedure
23.
In
requirements
granting
of
Federal
certification,
the
Rule
of
district
court determined that each of Gray’s claims ultimately hinges on
whether he can establish a distribution obligation, which is a
question that the district court found is capable of classwide
proof and predominates over any individual issues.
Federal
Rule
of
Civil
Procedure
23
We agree.
establishes
the
standard for class certification, and a proposed class must meet
the requirements of both Rule 23(a) and Rule 23(b). First, a
class
action
“must
comply
established
in
Rule
23(a):
commonality
of
factual
and
with
the
four
(1)
numerosity
legal
issues;
of
(3)
prerequisites
parties;
(2)
typicality
of
claims and defenses of class representatives; and (4) adequacy
of representation.” Gunnells v. Healthplan Services, Inc., 348
4
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F.3d 417, 423 (4th Cir. 2003) (quoting Fed. R. Civ. P. 23(a)).
Second, the class action must also fall within one of the three
categories
established
in
Rule
23(b).
Id.
Here,
Gray
seeks
certification of his claims under Rule 23(b)(3), which requires
proof that “the questions of law or fact common to class members
predominate
over
any
questions
affecting
only
individual
members, and that a class action is superior to other available
methods
for
controversy.”
fairly
Fed.
R.
and
Civ.
efficiently
P.
23(b)(3).
adjudicating
A
plaintiff
the
seeking
class certification bears the burden of proving the proposed
class complies with the requirements of Rule 23. Windham v. Am.
Brands, Inc., 565 F.2d 59, 65 n.6 (4th Cir. 1977) (en banc).
Commonality
is
generally
established
when
a
plaintiff’s claims have “questions of law or fact common to the
class.” Fed. R. Civ. P. 23(a)(2). As the Supreme Court recently
clarified, in order to satisfy the commonality requirement, the
plaintiff
must
“demonstrate
that
the
class
members
‘have
suffered the same injury,’” Wal-Mart Stores, Inc., v. Dukes, 131
S. Ct. 2541, 2551 (2011) (quoting Gen. Tel. Co. of Southwest v.
Falcon, 457 U.S. 147, 156 (1982)), and that the claim “depend[s]
upon
a
common
resolution
–
contention”
which
means
that
that
“is
capable
determination
of
of
classwide
its
truth
or
falsity will resolve an issue that is central to the validity of
each one of the claims in one stroke,” id.
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“In a class action brought under Rule 23(b)(3), the
commonality requirement of Rule 23(a)(2) is subsumed under, or
superseded by, the more stringent Rule 23(b)(3) requirement that
questions common to the class predominate over other questions.”
Lienhart v. Dryvit Sys., Inc., 255 F.3d 138, 146 n.4 (4th Cir.
2001) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 609
(1997)) (internal quotation marks omitted). The Rule 23(b)(3)
predominance
23(a)(2)’s
requirement
commonality
is
“far
more
requirement,
demanding”
and
the
than
Rule
"predominance
inquiry tests whether proposed classes are sufficiently cohesive
to warrant adjudication by representation.” Amchem Prods., 521
U.S. at 623. In other words, to satisfy Rule 23(b)(3), “[c]ommon
questions
must
individual
achieve
predominate
members;
.
economies
promote . . .
.
of
uniformity
over
.
any
[such
time,
of
questions
that]
a
effort,
decision
as
affecting
class
and
to
action
only
would
expense,
persons
and
similarly
situated.” Id. at 615 (internal quotation marks omitted).
White
Directory
initially
argued
the
contracts
at
issue did not include an express distribution term and therefore
contained
However,
contracts
no
contractual
during
do
oral
contain
obligation
argument,
a
White
distribution
regarding
distribution.
Directory
conceded
obligation,
and
the
further
conceded the distribution plan or scheme is the same for all
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advertisers
in
Date Filed: 08/25/2011
any
given
coverage
Page: 7 of 17
area.
Thus,
there
is
no
dispute that a uniform distribution obligation exists.
Having
conceded
the
existence
of
a
uniform
distribution obligation, White Directory’s remaining objections
to class certification carry little weight. White Directory’s
insistence
that
there
can
be
no
proof
of
a
distribution
obligation absent a distribution number, which the contracts do
not contain, is simply a variation of its now-rejected argument
that the contracts contain no distribution obligation at all.
Likewise, because White Directory concedes it has a distribution
obligation under the contract, the contracts’ integration clause
and North Carolina’s parol evidence rule 1 do not bar the use of
extrinsic evidence to determine what that obligation is. See,
e.g., Edwards v. Hill, 703 S.E.2d 452, 456 (N.C. Ct. App. 2010)
(noting extrinsic evidence may be used to explain the terms and
the parties’ expressed intentions in an integrated agreement).
In
fact,
during
distribution
course
of
oral
argument
requirement
distributing
White
under
the
books.”
Directory
contracts
Evidence
of
described
as
such
its
its
“normal
course
of
dealings and course of performance is permissible to explain or
supplement contractual terms. See Phelps v. Spivey, 486 S.E.2d
1
The parties agree that North Carolina law applies to
Gray’s breach of contract claim pursuant to the choice of law
provision in the contracts.
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226, 228-29 (N.C. Ct. App. 1997) (citing N.C. Gen. Stat. § 25-2202).
Finally, White Directory misses the mark by focusing
on the individualized nature of the different representations
that may (or may not) have been made in the negotiations between
each advertiser and White Directory. As we already discussed:
White Directory concedes (and common sense dictates) that the
normal
course
advertisers
of
in
a
distribution
given
is
the
market.
same
for
Accordingly,
all
the
directory
level
of
distribution does not vary based on what advertisers pay.
It
is
this
uniform
distribution
practice
which
distinguishes Wal-Mart. In Wal-Mart, the putative class sought
to prove Wal-Mart had a general policy of discrimination that
guided
millions
of
allegedly
discriminatory
employment
decisions. However, in Wal-Mart there was a question of whether
a general policy concerning such decisions existed and whether
that
general
policy
applied
to
all
hiring
decisions.
Here,
unlike Wal-Mart, there is no dispute that a uniform policy (or
obligation) exists or that such a uniform policy applies to all
plaintiffs;
extent
White
White
Directory
representations
distribution
Directory
argues
regarding
obligation
concedes
its
sales
distribution
in
the
both.
to
representatives
that
contract,
Moreover,
differed
evidence
made
from
of
the
the
those
representations – unlike evidence of White Directory’s course of
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dealings
Date Filed: 08/25/2011
concerning
distribution
Page: 9 of 17
-
would
be
barred
by
the
contract’s integration clause.
Thus, although White Directory’s sales representatives
may have had broad discretion to make different sales pitches to
different
advertisers,
they
could
regarding
distribution
not
obligations
make
which
binding
differed
promises
from
that
reflected in the contract. And, even if the parties may have had
different
expectations
regarding
other
variables
(e.g.
size,
color, location, price, etc.), the common predominating question
focuses on whether White Directory fulfilled that distribution
obligation.
To summarize, we think the district court was correct:
the
common
question
regarding
White
Directory’s
distribution
obligation predominates over any individual issues because the
putative class members all assert injury from the same action
(i.e.
failure
distribution
Directory
by
White
practice),
breached
its
Directory
and
to
follow
determination
standard
of
distribution
its
standard
whether
White
obligation
will
resolve in one stroke an issue that is central to the validity
of the class members’ breach of contract claims. In addition,
the
district
extrinsic
court
evidence
distribution
is.
correctly
to
found
establish
Because
the
what
same
that
that
Gray
may
normal
distribution
rely
on
course
of
obligation
applies to every advertiser within the same geographic market
9
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area,
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Date Filed: 08/25/2011
evidence
White
of
Directory’s
Page: 10 of 17
distribution
obligation
would apply to all such advertisers. Whether White Directory
reasonably met that obligation becomes a common question of fact
for the jury to decide. 2
Accordingly,
we
affirm
the
district
court’s
certification of the class. 3
AFFIRMED
2
We have reviewed Gray’s breach of a good faith and fair
dealing and unfair trade practices claim and believe he
satisfied his burden of establishing commonality as to those two
claims. Like the breach of contract claim, both of the remaining
claims center on the distribution obligation.
3
White Directory also argues that the district court abused
its discretion by (a) certifying Gray’s class on a conditional
basis, (b) failing to conduct a rigorous analysis of the record,
and (c) finding the class satisfied the superiority, typicality,
and adequacy requirements of Rule 23(b)(3). We have reviewed the
record and find no abuse of discretion by the district court on
these matters.
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WILKINSON, Circuit Judge, dissenting:
This
case
concerns
whether
advertisers
pursuing
a
breach of contract class action met the commonality requirement
of Rule 23(b)(3) for class certification, that “questions of law
or fact common to class members predominate over any questions
affecting only individual members.”
(emphasis added).
satisfied,
but
Plaintiffs contend that this standard was
an
their position.
Fed. R. Civ. P. 23(b)(3)
irresolvable
paradox
lies
at
the
heart
of
On the one hand, plaintiffs insist that there
is commonality due to a uniform distribution obligation in the
See ante, at 8.
contracts.
concede
that
extrinsic
Yet on the other, they nonetheless
evidence,
which
inevitably
will
be
individualized, is permissible and necessary to establish what
the normal course of distribution even was.
Because
the
integrated
contracts
in
fact
See ante, at 9.
lack
any
uniform
distribution term to supply the necessary commonality of law or
fact, I respectfully dissent.
I.
There
is
no
uniform
distribution
policy
in
contracts for the defendants to have allegedly breached.
contracts
would
be
the
logical
place
to
look
for
such
the
The
an
obligation and if it were there, the certification could readily
be affirmed.
I have looked high and low for such a distribution
11
Appeal: 10-1302
term,
Document: 40
but
cannot
Date Filed: 08/25/2011
find
one
for
Page: 12 of 17
the
simple
reason
that
contracts in this breach of contract action do not have one.
the
It
is the contracts that would have supplied a ready commonality
for something that now is anybody’s guess.
The
that
majority’s
“during
oral
conclusion
argument,
depends
White
on
its
Directory
contracts do contain a distribution obligation.”
assertion
conceded
the
Ante, at 6.
But concessions at oral argument, if made, are always to be
taken cautiously and there remains no provision in the contract
in which any distribution obligation is embodied.
So when and how was what to be distributed to whom?
Plaintiffs
fail
to
cite
any
language
from
the
contracts
to
demonstrate that any such distribution obligation exists within
them.
They don’t do so because they can’t -- such language is
nowhere to be found in the contracts themselves.
II.
To
establish
demonstrate
its
individualized
a
breach
extrinsic
distribution
therefore
evidence
of
requirement
requires
exactly
the
and
resort
kind
to
deemed
insufficient to support class certification by the Supreme Court
in Wal-Mart under the even lower threshold of Rule 23(a)(2).
See Fed. R. Civ. P. 23(a)(2) (requiring commonality of questions
of
law
or
fact,
but
not
requiring
12
predominance
of
those
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questions as in Rule 23(b)(3)); Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541 (2011).
In Wal-Mart, the Court was troubled by
the lack of proof of a uniform discrimination policy.
in
there
Hearst,
is
no
distribution
term
in
the
Likewise,
integrated
contracts speaking to what appellees contend is the common issue
demonstrating
breach
of
contract.
Without
a
contract
term
directly addressing the mechanics of distribution or the exact
number of phone books to be distributed, plaintiffs must turn to
individualized
extrinsic
evidence
to
establish
an
implied
distribution term.
A.
To
compensate
for
the
contract’s
silence
on
distribution and construct what might pass for a distribution
policy,
plaintiffs
extrinsic
evidence
practices.
invite
the
regarding
See ante, at 9.
district
White
court
to
Directory’s
resort
to
distribution
But by focusing on distribution
practices, and not on the representations made to clients with
respect to their individual contracts, plaintiffs are the ones
that
“miss[]
distribution
the
still
mark.”
begs
Ante,
the
at
critical
8.
Any
question
practice
of
what
of
that
distribution number was or whether the clients had any uniform
expectation
distribution
of
what
term
in
it
the
would
be.
contracts,
13
Absent
uniformity
an
explicit
in
actual
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distribution tells us nothing about the reliance interests of
individual clients that could form the basis of a contractual
breach.
This is especially true if the expectations and intent
of each client varied as a product of the individualized sales
representations that client received.
With respect, the majority is mistaken in its attempt
to
distinguish
“uniform
Wal-Mart
distribution
policy
is
not
rather
its
the
basis
of
White
at
8.
practice.”
Ante,
Directory’s
White
sales
on
distribution
policy,
which
sheds
light
Directory’s
The
relevant
practices,
on
the
reliance
interests of the parties and whether they were uniform.
this respect, Wal-Mart is squarely on point.
but
And in
Wal-Mart’s policy
that granted broad discretion to local supervisors over pay and
promotion
(in
conjunction
nondiscrimination)
commonality.
one
of
fatal
to
its
the
written
plaintiffs’
policy
of
assertion
of
As in Wal-Mart, White Directory’s sales policy was
broad
discretion
was
with
discretion.
to
craft
their
Specifically,
sales
pitch
to
salesmen
the
had
needs
broad
of
the
specific client.
As
a
result,
there
was
written and oral sales pitches.
substantial
variation
in
Not all members of the class
saw the same sales aids or the same salespersons nor were they
subject
to
distribution.
the
same
representations
with
respect
to
Evidence of the parties’ intent and expectations
14
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with
Document: 40
respect
to
individualized
Date Filed: 08/25/2011
distribution
will
anecdotal,
just
and
insufficient in Wal-Mart.
of
phone
books
representations
was
to
Page: 15 of 17
like
the
necessarily
evidence
be
deemed
Thus, even if the actual distribution
uniform,
class
therefore
the
members
lack
of
indicates
uniformity
that
there
in
is
the
no
“common answer” to the critical question of the intent of the
parties to each contract.
See Wal-Mart, 131 S. Ct. at 2552.
B.
The extrinsic evidence and the individualized nature
of the claims deriving from it forecast all sorts of difficult
problems
down
the
road.
Plaintiffs
would
need
to
introduce
individualized evidence, of the kind rejected in Wal-Mart, to
prove
a
specific
numerical
distribution
term
--
specifically
evidence of what sales aids were used or what sales pitches were
given
at
individual
meetings. *
Individualized
evidentiary
hearings will be necessary to prove both injury and any damages
that may flow from a breach of contract.
In contrast, the class
action device as applied to this variety of circumstances may
*
It is worth emphasizing that even appellees have never
identified a uniform distribution policy within the contracts as
the basis for the breach. Rather, their theory of the case has
always rested on extrinsic evidence of the representations about
distribution
made
to
clients
in
sales
aids
and
sales
conversations.
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force appellants into a one-size-fits-all defense, compromising
what is and should have been their legitimate right to make a
defense tailored to individual circumstances.
In this case,
therefore, the class action method hardly seems “superior to
other available methods for fairly and efficiently adjudicating
the controversy.”
Fed. R. Civ. P. 23(b)(3).
III.
In
the
end,
we
are
still
left
with
the
question,
unanswered by the contract, of what the uniform distribution
policy was.
Plaintiffs want to have their cake and eat it too.
They allege commonality for class certification on the basis of
an alleged uniform distribution obligation, and yet expect use
of extrinsic evidence to demonstrate that such an obligation
existed and was breached.
But just as the absence of a uniform
discrimination policy was fatal to certification in Wal-Mart, so
too is the absence of uniform representations with respect to
distribution fatal to the certification effort here.
Again, it
is the representations that matter, because it is the violation
of
those
breach
of
representations
contract
that
claim.
alone
could
Accordingly,
lead
there
to
is
a
no
viable
way
to
“resolve an issue that is central to the validity of each one of
the claims in one stroke.”
Wal-Mart, 131 S. Ct. at 2545.
16
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would therefore reverse the class certification order in this
case.
17
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