Christopher Hesse v. Sprint Corporation ( 2010 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHRISTOPHER W. HESSE; NATHANIEL 
OLSON,
Plaintiffs-Appellants,
v.
No. 08-35235
SPRINT CORPORATION,
a foreign corporation,  D.C. No.
2:-6-cv-00592-JCC
Defendant,
OPINION
and
SPRINT SPECTRUM LP,
doing business as Sprint PCS,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Washington
John C. Coughenour, District Judge, Presiding
Argued and Submitted
November 5, 2009—Seattle, Washington
Filed March 10, 2010
Before: Arthur L. Alarcón, Andrew J. Kleinfeld and
Richard R. Clifton, Circuit Judges.
Opinion by Judge Clifton
3845
3848 HESSE v. SPRINT
COUNSEL
David Elliot Breskin and Daniel Foster Johnson (argued),
Breskin Johnson & Townsend PLLC, Seattle, Washington;
HESSE v. SPRINT 3849
and Bradley Jerome Moore, Stritmatter Kessler Whelan
Coluccio, Seattle, Washington, for the plaintiffs-appellants.
Gavin W. Skok and David Brenner, Riddell Williams, PS,
Seattle, Washington; Robert Bruce Allensworth, Brian M.
Forbes, Ryan M. Tosi, and Andrew Glass (argued), Kirkpat-
rick & Lockhart Preston Gates Ellis LLP, Boston, Massachu-
setts, for the defendant-appellee.
OPINION
CLIFTON, Circuit Judge:
This case requires us to consider whether a broad release of
claims in a nationwide settlement agreement between Sprint
and its customers precludes the present class action involving
a Washington state tax that Sprint invoiced to its Washington
customers. That nationwide settlement arose out of a lawsuit
that challenged Sprint’s billing of customers for certain fed-
eral regulatory fees. Because we conclude that the Washing-
ton Plaintiffs’ interests were not adequately represented in the
prior action and that their claims are not “based on the identi-
cal factual predicate as that underlying the claims in the set-
tled class action,” Williams v. Boeing Co., 517 F.3d 1120,
1133 (9th Cir. 2008), we hold that the prior settlement did not
release the claims at issue in this case, and we vacate the dis-
trict court’s grant of summary judgment in favor of Sprint.
I. Background
The State of Washington imposes a business and occupa-
tion tax (“B&O tax”) on every person engaged in business
activities in the state. Wash. Rev. Code § 82.04.220. Wash-
ington law specifies that the B&O tax must be collected from
a business as part of its “operating overhead” rather than
imposed as a separate “tax[ ] upon the purchasers or custom-
3850 HESSE v. SPRINT
ers.” Id. § 82.04.500 (the “B&O Tax Statute”). It is alleged
that Sprint passed the tax directly to its customers as a sepa-
rate line item labeled “Washington State B&O Tax Sur-
charge” starting in April 2001.
Christopher Hesse and Nathaniel Olson (“the Washington
Plaintiffs”) filed separate class actions in Washington state
court alleging violations of the B&O Tax Statute and the
Washington Consumer Protection Act (“CPA”), Wash. Rev.
Code § 19.86.030, as well as common law breach of contract
and unjust enrichment. Sprint removed both cases to the
United States District Court for the Western District of Wash-
ington pursuant to 28 U.S.C. § 1441(a).
The district court dismissed all claims predicated on the
B&O Tax Statute as preempted by the Federal Communica-
tions Act (“FCA”), 47 U.S.C. § 332(c)(3)(A), but denied
Sprint’s motion to dismiss insofar as it related to “Plaintiffs’
other contract and CPA claims.” The district court then certi-
fied a class of “all current and former Washington state wire-
less service customers of Sprint, who have been charged and
paid to Sprint a ‘Washington State B&O Tax Surcharge’ ”
with the Washington Plaintiffs as class representatives.
After filing its answer to the Washington Plaintiffs’ consol-
idated complaint, Sprint moved for summary judgment, argu-
ing for the first time that the suit was barred by a class
settlement between Sprint and its customers approved by a
Kansas state court in 2006 (the “Benney Settlement”).
The Benney Settlement resulted from several class actions
filed in 2002 in various state courts and then dismissed and
refiled in Kansas state court in 2005 for purposes of settle-
ment. One of those class actions was initiated in Missouri by
Greg Benney (the “Benney Class Plaintiff”), who alleged that
Sprint’s surcharges to recoup federal regulatory fees violated
consumer protection laws, represented a breach of contract,
and resulted in unjust enrichment. The relevant regulatory
HESSE v. SPRINT 3851
fees were defined in the settlement agreement to include only
specified fees imposed to recover the cost of compliance with
federally mandated programs.1 The Benney class was defined
to consist of “all current and former Sprint wireless customers
in the United States who were customers for any time during
the period December 1, 2000 to the Effective Date [of the set-
tlement in late 2006] and who were charged Regulatory Fees
(as defined in [the Benney Settlement]).” It is not disputed
that the named plaintiffs in the case before us were members
of the Benney class and that they did not opt out.
Sprint settled with the nationwide plaintiff classes, includ-
ing the Benney class, in February 2006. The settlement pro-
vided various benefits, including phone cards and invoice
credits on future bills, to members of the various subclasses
of the Benney class who submitted claim forms. Sprint
agreed, in a paragraph titled “Injunctive Relief as to Billing
and Advertising Practices Related to the Regulatory Fees,” to
disclose for at least two years that the regulatory fees and
other surcharges to recoup the cost of compliance with gov-
ernment programs are “not taxes or government mandated
charges.” The term of the Benney Settlement relevant to
Sprint’s defense in the present case is Paragraph 22(a)(1),
1
The Benney Settlement specified that the “Regulatory Fees” at issue in
the Benney class action included only
(i) the “USA Regulatory Obligations & Fees” fee or surcharge on
subscriber invoices that Sprint charged subscribers for the cost of
implementing federally mandated programs for Enhanced 911
(“E911”) emergency calling Phase II and federal Universal Ser-
vice Fund contributions (“USF”); (ii) “Federal Telephone Num-
ber Pooling” fee or surcharge on subscriber invoices that Sprint
charged subscribers to recover costs of implementing the feder-
ally mandated program for wireless number portability; (iii)
“Federal USF,” “Federal E911” and “Federal Wireless Number
Pooling and Portability” fees or surcharges on subscriber invoices
that Sprint charged wireless subscribers to recover costs of imple-
menting federally mandated programs for wireless number pool-
ing and portability, federal Universal Service Fund contributions,
and Enhanced 911 emergency calling Phase II.
3852 HESSE v. SPRINT
which purported to release Sprint from a set of potential
claims much broader than the surcharges for federal regula-
tory fees that were the subject of the Benney action:
any and all claims . . . that have been, could have
been, or in the future might be asserted in the [Ben-
ney] Action[ ] or in any other court or proceeding
which relate in any way to allegations that . . .
[Sprint] failed properly to disclose or otherwise
improperly charged for surcharges, regulatory fees
or excise taxes, including but not limited to the Reg-
ulatory Fees; and all other causes of action . . .
whether based on federal, state, or local statute . . .
that have been, could have been, may be, or could be
alleged or asserted by any Class member . . . against
[Sprint] relating to . . . the subject matter of any of
the claims alleged in the Benney Action.
The Kansas court granted final approval of the Benney Set-
tlement in November 2006. That order incorporated the settle-
ment’s release by reference and included its own expansive
release of liability.2
The district court granted Sprint’s motion for summary
judgment in the present case based on these broad releases of
liability.3
2
The Kansas court’s order approving the Benney Settlement purported
to release Sprint
from any liability to each and every Benney . . . Settlement Class
members [sic] . . . arising from or relating to any and all claims
that were or could have been alleged in the Benney matter,
including but not limited to claims which relate in any way to
allegations that . . . Sprint failed properly to disclose or otherwise
improperly charged for surcharges, regulatory fees or excise
taxes, including but not limited to Regulatory Fees . . . .
3
Sprint also moved for summary judgment on the grounds that the vol-
untary payment doctrine bars the Washington Plaintiffs’ contract and
HESSE v. SPRINT 3853
II. Discussion
A. Federal Preemption
[1] We start with the district court’s dismissal of the claims
based on violations of the B&O Tax Statute. The district court
held that the Washington state law was preempted by a provi-
sion of the FCA decreeing that “no State or local government
shall have any authority to regulate the entry of or the rates
charged by any commercial mobile service or any private
mobile service.” 47 U.S.C. § 332(c)(3)(A)). Our court subse-
quently held, to the contrary, that the B&O Tax Statute does
not regulate “the rates charged” but only “the method of dis-
closure” and is thus not preempted by the FCA. Peck v.
Cingular Wireless, LLC, 535 F.3d 1053, 1058 (9th Cir. 2008).
We therefore vacate the district court’s Amended Order dated
February 13, 2007, which dismissed the Washington Plain-
tiffs’ claims for violations of the B&O Tax Statute.
B. The Benney Settlement
We turn next to the district court’s grant of summary judg-
ment on the ground that the Washington Plaintiffs’ claims
were released by the Benney Settlement. We review the dis-
trict court’s grant of summary judgment de novo. United
States v. Milner, 583 F.3d 1174, 1182 (9th Cir. 2009).
Sprint argues that the Washington Plaintiffs’ claims in this
case fall within the broad release of liability in the Benney
Settlement because they are “claims . . . that . . . could have
been . . . asserted . . . in [an]other court or proceeding which
unjust enrichment claims, that there was no breach of contract under its
interpretation of the contract, that a claim for unjust enrichment is incon-
sistent with a claim for breach of contract, and that CPA claims fail in the
absence of deception and causation. The district court did not reach these
alternative grounds.
3854 HESSE v. SPRINT
relate . . . to allegations that . . . [Sprint] failed properly to dis-
close or otherwise improperly charged for surcharges, regula-
tory fees or excise taxes . . . .” If this release were to operate
according to that interpretation, the Washington Plaintiffs
would have no recourse for their surcharge-related claims in
federal court because “[c]laim preclusion in federal court can
be based on a state court settlement.” Howard v. America
Online, Inc., 208 F.3d 741, 748 (9th Cir. 2000). We conclude,
however, that the release cannot preclude the Washington
Plaintiffs’ claims because the Benney Class Plaintiff did not
adequately represent the Washington Plaintiffs and because
the Washington Plaintiffs’ claims are based on a set of facts
different from those underlying the claims settled in the Ben-
ney Settlement. For these two independent reasons, we vacate
the district court’s order granting summary judgment.
1. Collateral Review
[2] At the threshold, Sprint contends that we may not
inquire into the adequacy of representation in the Benney
action because such an inquiry is an impermissible collateral
attack on the Kansas court’s judgment. The Full Faith and
Credit Act generally requires us to afford the “judicial pro-
ceedings” of any State “the same full faith and credit . . . as
they have by law or usage in the courts of such State” as
determined by the rules of the State. 28 U.S.C. § 1738; see
Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 373
(1996). But a state court’s power to declare the preclusive
effect of its judgments is not without limit: “A State may not
grant preclusive effect in its own courts to a constitutionally
infirm judgment,” and we are “not required to accord full
faith and credit to such a judgment.” Kremer v. Chem. Constr.
Corp., 456 U.S. 461, 482 (1982), quoted in Epstein v. MCA,
Inc. (Epstein II), 179 F.3d 641, 645 (9th Cir. 1999).
In Matsushita, the Supreme Court reversed a decision of
our court that did not accord full faith and credit as required
by 28 U.S.C. § 1738 to a state court judgment approving a
HESSE v. SPRINT 3855
settlement that released exclusively federal claims. 516 U.S.
at 373, rev’g Epstein v. MCA, Inc. (Epstein I), 50 F.3d 644
(9th Cir. 1995). The Supreme Court held that we must look
to state law in determining the preclusive effect of a state
court judgment releasing such claims. Id. at 374. Our court’s
approach in Epstein I had failed to apply the Delaware
Supreme Court’s claim preclusion doctrine under which a set-
tlement could release even exclusively federal claims.
On remand from the Supreme Court in Matsushita, the fed-
eral plaintiff class argued that the named plaintiffs of the set-
tled state court class did not adequately represent their
interests as to the federal claims in state court. Epstein II, 179
F.3d at 644. We stated that while “broad collateral review of
the adequacy of representation . . . is not available” after Mat-
sushita, “[l]imited collateral review would be appropriate . . .
to consider whether the procedures in the prior litigation
afforded the party against whom the earlier judgment is
asserted a ‘full and fair opportunity’ to litigate the claim or
issue.” Id. at 648-49 (quoting Kremer, 456 U.S. at 480); see
also Stephenson v. Dow Chem. Co., 273 F.3d 249, 258 & n.6
(2d Cir. 2001) (holding that under the Epstein II standard, col-
lateral review is permissible where the court that approved the
settlement did not address the adequacy of representation as
to a specific subset of a class “whose injuries manifested after
depletion of the settlement funds”).
[3] Normally we will satisfy ourselves that the party
received the requisite notice, opportunity to be heard, and
adequate representation by referencing the state court’s find-
ings. See Epstein II, 179 F.3d at 648. In Epstein II we found
no need to review collaterally the Delaware Chancery Court’s
decision because that court expressly found that class repre-
sentation was adequate as to the relevant federal claims, id. at
643, 649-50,4 and the Supreme Court’s decision in Matsushita
4
The case for adequate representation was much stronger in Epstein,
where the Delaware Chancery Court specifically released the federal
3856 HESSE v. SPRINT
was based on its own conclusion that the Delaware judgment
satisfied due process. See id. at 645 (citing Matsushita, 516
U.S. at 379). In this case, however, the Kansas court made no
finding that the Benney Class Plaintiff’s representation of the
class was adequate as to the B&O Tax Surcharge claims at
issue in this case, and we are faced with no Supreme Court
decision premised on the constitutional validity of the Kansas
judgment.
The Kansas court’s findings are insufficient to demonstrate
that the Benney Class Plaintiff adequately represented the
Washington Plaintiffs. The Kansas court found that the Ben-
ney Class Plaintiff’s Sprint bills were typical of the other class
members’ bills, but only “in that each bill imposed the
[defined] Regulatory Fees.” The Kansas court also noted that
the Benney Class Plaintiff “paid the Regulatory Fees at issue
in this case” but did not make an explicit finding that the Ben-
ney Plaintiff was an adequate representative of the class,
much less that he was an adequate class representative as to
the B&O Tax Surcharge claims. Because that question was
not addressed with any specificity by the Kansas court, it is
a proper subject for collateral review. Cf. id. at 649 (relying
on the Delaware court’s express finding of “adequate repre-
sentation” and “notice plus an opportunity to be heard and
participate in the litigation.” (quoting Phillips Petroleum Co.
v. Shutts, 472 U.S. 797, 812 (1985))).
[4] Consistent with Epstein II, we review the Benney Judg-
ment only to determine whether, in the absence of a specific
finding by the Kansas court, its judgment satisfies due process
claims at issue in the objectors’ action, Matsushita, 516 U.S. 371-72, and
both identical classes of shareholders advanced claims “aris[ing] out of the
same transaction” — the tender offer by which their shares in a corpora-
tion were sold. Nothing distinguished the subsequent class from the identi-
cal settled class except that the subsequent class filed federal claims in
federal court and objected to the state court settlement, which had been
predicated on state law claims. Epstein I, 50 F.3d at 666; Epstein II, 179
F.3d at 643.
HESSE v. SPRINT 3857
as to the claims at issue here, and whether, under Kansas law,
it precludes the Washington Plaintiffs’ claims. See id. at 645.
2. Inadequate Class Representation
The Benney Class Plaintiff was not an adequate representa-
tive for the claims asserted by the Washington Plaintiffs.
Without adequate representation, a court order approving a
claim-preclusive class action settlement agreement cannot sat-
isfy due process as to all members of the class. See Shutts,
472 U.S. at 812 (“[T]he Due Process Clause . . . requires that
the named plaintiff at all times adequately represent the inter-
ests of the absent class members.”); Hanlon v. Chrysler
Corp., 150 F.3d 1011, 1020 (9th Cir. 1998) (“To satisfy con-
stitutional due process concerns, absent class members must
be afforded adequate representation before entry of a judg-
ment which binds them.”); Brown v. Ticor Title Ins. Co., 982
F.2d 386, 390 (9th Cir. 1992) (“[I]f the plaintiff was not ade-
quately represented in the prior action, or there was a denial
of due process, then the prior decision has no preclusive
effect.”).
[5] Class representation is inadequate if the named plaintiff
fails to prosecute the action vigorously on behalf of the entire
class or has an insurmountable conflict of interest with other
class members. See Hanlon v. Chrysler Corp., 150 F.3d 1011,
1020 (9th Cir. 1998). The Benney Class Plaintiff’s representa-
tion of the Washington Plaintiffs was inadequate for both rea-
sons.
[6] First, the Benney Class Plaintiff did not share the
Washington Plaintiffs’ B&O Tax Surcharge claims, or even
pretend to prosecute those claims on their behalf. The Benney
Class Plaintiff was a resident of Missouri who never paid the
Washington B&O Tax Surcharge. It is evident that the Benney
Class Plaintiff did not vigorously prosecute the claims rele-
vant to this case. His petition, the settlement agreement it
induced, and the judgment approving that settlement agree-
3858 HESSE v. SPRINT
ment all confirm that the Benney class action was brought to
remedy a different set of injuries: Sprint’s nationwide sur-
charges that shifted to its customers certain costs imposed by
the federal government.
[7] Second, as a result of not possessing the same type of
claim as the Washington Plaintiffs, the Benney Class Plaintiff
had an insurmountable conflict of interest with those members
of the class. Conflicts of interest may arise when one group
within a larger class possesses a claim that is neither typical
of the rest of the class nor shared by the class representative.
See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625-27
(1997) (holding class representation inadequate because of the
conflict of interest between class members manifesting asbes-
tos injuries and those with yet undiagnosed injuries). In this
case, the Benney Class Plaintiff’s interest in settling his fed-
eral Regulatory Fee claims, even at the cost of a broad release
of other claims he did not possess, was in conflict with the
Washington Plaintiffs’ unrepresented interest in prosecuting
their B&O Tax Surcharge claims. The Benney Class Plain-
tiff’s representation of the Washington Plaintiffs was there-
fore inadequate as to those claims.
[8] The Benney Judgment would be constitutionally infirm
if it were interpreted, as Sprint contends it should be, to pre-
clude the B&O Tax Surcharge claims at issue in this case,
because the Benney Class Plaintiff’s representation of the
Washington Plaintiffs failed to satisfy due process as to those
claims.5 Thus, even if Kansas law — contrary to our interpre-
tation of it below — did allow the Benney Judgment to
release the Washington Plaintiffs’ claims related to the B&O
5
We do not set aside the Kansas court’s approval of the settlement.
Indeed, we accord that judgment full faith and credit and presume that it
is binding on all claims that it properly released under Kansas law, includ-
ing any claims of the Washington Plaintiffs pertaining to the federal regu-
latory fees at issue in Benney. We hold only that any release of the B&O
Tax Surcharge claims at issue in this case by the judgment approving the
Benney Settlement would violate due process.
HESSE v. SPRINT 3859
Tax Surcharge, we would not be bound to give the Benney
Judgment that effect.
3. Identical Factual Predicate
Even apart from due process concerns, a settlement agree-
ment’s bare assertion that a party will not be liable for a broad
swath of potential claims does not necessarily make it so. See
Williams, 517 F.3d at 1134 (“While Boeing may have drafted
the settlement agreement to include as broad a release as pos-
sible, the release would have only been enforceable as to sub-
sequent claims . . . depending upon the same set of facts.”
(internal quotations marks omitted)).
As a threshold matter, Sprint contends that we may not
consider the Washington Plaintiffs’ argument that their claims
have a different factual predicate from the claims involved in
the Benney Settlement because they raised that argument for
the first time in a motion for reconsideration after the district
court granted Sprint’s motion for summary judgment, and the
Washington Plaintiffs did not amend their notice of appeal
after the district court denied their motion for reconsideration.
See Intercontinental Travel Mktg. v. FDIC, 45 F.3d 1278,
1286 (9th Cir. 1994) (“Raising an issue for the first time in
a motion to reconsider is not considered adequate preservation
of the issue at a summary judgment stage.”).
We have discretion to consider an issue raised for the first
time on appeal “(1) where review is necessary to prevent a
miscarriage of justice or to preserve the integrity of the judi-
cial process; (2) where there is a change in the law creating
a new issue; or (3) when the issue presented is purely one of
law and either does not depend on the factual record devel-
oped below, or the pertinent record has been fully developed.”
Comedy Club, Inc. v. Improv West Assocs., 553 F.3d 1277,
n.11 (9th Cir. 2009) (internal quotation marks omitted). We
exercise that discretion here. The Washington Plaintiffs’
“identical factual predicate” argument is a mixed question of
3860 HESSE v. SPRINT
law and fact. They argue both that a settlement must be based
on the “identical factual predicate” as a subsequent claim to
preclude that claim, and that the Benney claims and the B&O
Tax Surcharge claims do not share an identical factual predi-
cate. We are persuaded to consider this argument because it
is conceptually related to the arguments raised in response to
Sprint’s motion for summary judgment in which Sprint first
put forward the theory that the Benney Settlement released the
Washington Plaintiffs’ claims, and the pertinent factual record
regarding the basis for the claims in both cases is fully devel-
oped.
[9] A settlement agreement may preclude a party from
bringing a related claim in the future “even though the claim
was not presented and might not have been presentable in the
class action,” but only where the released claim is “based on
the identical factual predicate as that underlying the claims in
the settled class action.” Williams v. Boeing Co., 517 F.3d
1120, 1133 (9th Cir. 2008); Class Plaintiffs v. City of Seattle,
955 F.2d 1268, 1287 (9th Cir. 1992), quoted in Howard, 208
F.3d at 747. Thus, we have held that federal district courts
properly released claims not alleged in the underlying com-
plaint where those claims depended on the same set of facts
as the claims that gave rise to the settlement. See Reyn’s Pasta
Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 749 (9th Cir.
2006) (affirming dismissal of a class action against credit card
companies predicated on the same price-fixing predicate and
injury as claims settled in an earlier class action, even though
the subsequent suit “posit[ed] a different theory of anti-
competitive conduct”); Class Plaintiffs, 955 F.2d at 1286-91
(affirming approval of a settlement relating to certain bond
defaults that released claims by an identical class of plaintiffs
in a pending case that related to the same bond defaults).
We applied the same reasoning to hold that a state court’s
approval of a settlement agreement could release not only the
state law fraudulent billing claims before it, but also federal
RICO claims arising from the same billing practices. Howard,
HESSE v. SPRINT 3861
208 F.3d at 746-48; see also Epstein II, 179 F.3d at 644-45
(discussing the Supreme Court’s holding that members of a
settlement class were bound by the Delaware Court of Chan-
cery’s release of federal claims) (citing Matsushita, 516 U.S.
at 377, 379); Class Plaintiffs, 955 F.2d at 1288 (noting with
approval that “other circuits have held that a state court was
within its power to approve the release of a federal claim,
which could not have been brought in the state court”).
Because the Benney Settlement was approved by order of
a Kansas state court, we apply Kansas law in determining its
preclusive effect. See Howard, 208 F.3d at 748 (“The preclu-
sive effect of a state court judgment in federal court is based
on state preclusion law.”). Kansas courts have not explicitly
applied the identical factual predicate doctrine to determine
the effect of releases of liability in court-approved settlement
agreements, but claim preclusion doctrine in Kansas does not
appear to us to be substantially different from the California
and federal law applied in Howard and Reyn’s Pasta Bella. In
Kansas, “[a] voluntary dismissal of a case with prejudice,
based on a settlement agreement that is approved by the court
and journalized, is a final judgment on the merits.” Honeycutt
v. City of Wichita, 836 P.2d 1128, 1133 (Kan. 1992). Such a
dismissal “is res judicata and bars a later lawsuit on the same
transaction or occurrence.” Id. at 1134; see also Anderson v.
Employers Mut. Cas. Ins. Co., 6 P.3d 918, 923-24 (Kan. Ct.
App. 2000) (holding that a general release does not bar claims
against tortfeasors who are not specifically named in the
release). It appears to us that claim preclusion in Kansas is
guided by the same general principles as in this circuit.
[10] Unlike the claims in Reyn’s Pasta Bella, Howard,
Epstein II, and Class Plaintiffs, which were held to have been
validly released by earlier settlements of related claims, the
Washington Plaintiffs’ claims do not share an identical factual
predicate with the claims resolved in the Benney Settlement.
The claims underlying the Benney Settlement dealt exclu-
sively with specific nationwide surcharges to recoup the costs
3862 HESSE v. SPRINT
of compliance with federal programs, whereas the claims at
issue in the present case involve Sprint’s statewide surcharge
to recoup the cost of the Washington B&O Tax allegedly in
violation of a Washington statute. The superficial similarity
between the two class actions is insufficient to justify the
release of the later claims by the settlement of the former.
Both involve claims that Sprint improperly billed government
taxes or fees to its customers, but they deal with different sur-
charges, imposed to recoup different costs, that were alleged
to be improper for different reasons.
[11] Especially relevant to our determination that the
claims lack an identical factual predicate is our observation,
noted above, that the Benney Class Plaintiff did not ade-
quately represent the Washington Plaintiffs as to their B&O
Tax Surcharge claims. The Kansas class action statute, like
Federal Rule 23, requires that a class representative possess
claims “typical of the claims . . . of the class” and that he
“fairly and adequately protect the interests of the class.” Kan.
Stat. Ann. § 60-223(a)(3)-(4); Fed. R. Civ. P. 23(a)(3)-(4).
Under Kansas law, a plaintiff “cannot represent a class in
which she is not a member.” Chamberlain v. Farm Bureau
Mut. Ins. Co., 137 P.3d 1081, 1088 (Kan. Ct. App. 2006). As
a resident of Missouri, Benney’s injury was not typical of the
Washington Plaintiffs’ injury, and, as a result, he failed to
vigorously prosecute their claims or avoid the conflict
between their legal interests. See supra at 3857-59. It seems
to us unlikely that a plaintiff class’s claims would ever be
based on the identical factual predicate as the claims of a third
party who did not adequately represent the class’s interests.
We conclude that the claims raised by the Washington Plain-
tiffs in this case are not derived from the same “transaction or
occurrence” as the claims of the Benney Class Plaintiff,
Honeycutt, 836 P.2d at 1134, and therefore were not released
by the Benney Settlement.
III. Conclusion
[12] In light of the failure of the Benney Class Plaintiff to
adequately represent the Washington Plaintiffs and the
HESSE v. SPRINT 3863
absence of an identical factual predicate between their respec-
tive claims, the Kansas court’s judgment approving the Ben-
ney Settlement cannot preclude the Washington Plaintiffs’
unique causes of action, regardless of the expansive release
contained in that judgment. On both grounds, therefore, we
vacate the district court’s order granting summary judgment.
Sprint raises other grounds for summary judgment that the
district court did not have occasion to consider. We do not
reach them now. On remand, the district court should address
Sprint’s alternate grounds for summary judgment.
VACATED and REMANDED.