State ex rel. General Credit Acceptance Company, LLC, Relator v. The Honorable David L. Vincent III , 570 S.W.3d 42 ( 2019 )

SUPREME COURT OF MISSOURI
en banc
STATE EX REL. GENERAL CREDIT ) Opinion issued April 2, 2019
ACCEPTANCE COMPANY, LLC, )
)
Relator, )
)
v. ) No. SC97175
)
THE HONORABLE DAVID L. )
VINCENT III, )
)
Respondent. )
ORIGINAL PROCEEDING IN PROHIBITION
General Credit Acceptance Company, LLC, (GCAC) filed a petition for a writ of
prohibition barring the circuit court from taking any further action other than vacating the
order granting class certification in whole or in part. The circuit court abused its discretion
by certifying an overly broad class. The circuit court is directed to withdraw its
certification of the class as presently defined because it includes large numbers of
individual claims precluded by final deficiency judgments or estopped by their failure to
disclose the claims in bankruptcy.
Further, the named plaintiff is not typical of the class because she voluntarily
surrendered her vehicle and because GCAC has no deficiency judgment against her. Each
class and subclass must have a representative whose claims are typical of the claims of
members of that class and subclass. Either the class must be redefined to include only
those for whom the named class representative is typical or a new or additional class
representative must be named so each class or subclass has a representative whose claims
are typical of the claims of the class. The preliminary writ is made permanent.
Factual and Procedural Background
Helena Weatherspoon defaulted on payments owed to Car Credit Acceptance
Company pursuant to a consumer credit contract requiring her to make installment
payments. Car Credit sent Weatherspoon notices informing her of the default and how to
cure it. Weatherspoon did not cure the default. Car Credit assigned Weatherspoon's credit
contract to GCAC. GCAC repossessed the vehicle, but Weatherspoon regained possession.
Weatherspoon defaulted again, and GCAC again notified her of the default and how
to cure it. Weatherspoon did not cure the default and voluntarily surrendered her vehicle
to GCAC. GCAC mailed a presale notice informing Weatherspoon her vehicle would be
sold in compliance with the Missouri Uniform Commercial Code (UCC). GCAC sold the
vehicle and mailed Weatherspoon a post-sale notice of her deficiency balance.
Weatherspoon filed the underlying class action "on behalf of all other similarly
situated Missouri consumers" alleging GCAC, and its predecessors or successors, violated
statutory notice requirements relating to the repossession and disposition of collateral and
collected unlawful interest following default and repossession of the collateral. 1
1
Weatherspoon alleged GCAC violated § 408.554, RSMo 2000, by omitting statutorily required
language from its right to cure notice; violated § 408.555, RSMo Supp. 2006, by wrongfully
2
Weatherspoon alleged the deficient notices caused her and all class members to suffer harm
to their credit, character, and general reputation. Weatherspoon requested "damages equal
to the amount of any judgment wrongfully obtained by GCAC" and "a mandatory
injunction compelling GCAC to return any money collected for deficiency judgments, time
price differential, delinquency and collection charges from Plaintiff and the classes." She
also requested statutory damages, an injunction preventing GCAC from collecting
deficiency judgments from the class, and a declaration that GCAC's form right to cure,
presale, and post-sale notices violate Missouri law.
GCAC introduced evidence of statistical sampling showing approximately 87
percent of potential class members' claims against GCAC were resolved by final deficiency
judgments or were extinguished in bankruptcy. GCAC argued this evidence showed the
proposed class was overbroad because the vast majority of potential class members' claims
were resolved in prior judicial proceedings. GCAC has no deficiency judgment against
Weatherspoon, and she did not declare bankruptcy.
The circuit court certified two classes and designated Weatherspoon as the sole class
representative. The first class included "all persons who are named as borrowers or buyers
with a Missouri address on a loan or financing agreement with GCAC, assigned to GCAC
or owned by GCAC; whose loan or financing agreement was secured by collateral; and
accelerating loan balances and obtaining possession of vehicles without proper notice; violated
§ 400.9-602, RSMo Supp. 2002, and § 400.9-623, RSMo Supp. 2001, by providing presale notices
restricting redemption payments; provided misleading presale notices regarding the timeframe for
selling repossessed vehicles; provided inadequate disclosures on post-sale notices; and provided
post-sale notices informing consumers they owed a balance including interest in violation of
§ 408.553, RSMo 2000.
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who had the possession of their collateral taken by GCAC, voluntarily or involuntarily,
from May 12, 2008 to present." The second class included "all persons from Class 1 who
had the possession of their collateral taken by GCAC involuntarily."
GCAC filed a petition for permission to appeal the certification order pursuant to
Rule 84.035. The court of appeals denied the petition. GCAC filed the underlying petition
for a writ of prohibition asserting the circuit court abused its discretion by certifying the
class. This Court issued a preliminary writ of prohibition.
Standard of Review
This Court has jurisdiction to issue original remedial writs. Mo. Const. art. V, § 4.1.
A writ petition is the appropriate procedure for obtaining review of the court of appeals'
denial of a petition for permission to appeal from an order granting class certification. State
ex rel. Coca-Cola Co. v. Nixon, 249 S.W.3d 855, 859-60 (Mo. banc 2008).
Determining whether a claim should proceed as a class action "ultimately rests with
the sound discretion of the trial court." Id. at 860 (internal quotation omitted). The circuit
court abuses its discretion "if its order is clearly against the logic of the circumstance, is
arbitrary and unreasonable, and indicates a lack of careful consideration." Id. (internal
quotation omitted).
Class Certification
"[T]he underlying question in any class action certification is whether the class
action device provides the most efficient and just method to resolve the controversy at
hand, all things considered." Id. at 860-61. Rule 52.08(a) provides all class actions must
satisfy the following four elements:
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(1) the class is so numerous that joinder of all members is impracticable, (2)
there are questions of law or fact common to the class, (3) the claims or
defenses of the representative parties are typical of the claims or defenses of
the class, and (4) the representative parties will fairly and adequately protect
the interests of the class.
If the Rule 52.08(a) prerequisites are met, a class action may be maintained only if
the plaintiff shows the class satisfies one of the three additional standards set forth in Rule
52.08(b). The circuit court determined Weatherspoon's putative class satisfied Rule
52.08(b)(3), which provides certification is proper if "the court finds that the questions of
law or fact common to the members of the class predominate over any questions affecting
only individual members, and that a class action is superior to other available methods for
the fair and efficient adjudication of the controversy."
GCAC asserts the circuit court abused its discretion in certifying the class because
individual issues predominate. As to liability, however, the class claims are based on an
interpretation of the form UCC notices regarding the right to cure the default and rights to
presale and post-sale notice of disposition of the collateral. A central aspect of
Weatherspoon's putative class action is a determination of whether GCAC violated any
statutory provisions governing its form UCC notices. Claims involving the interpretation
of form contracts often present a "classic case for treatment as a class action." McKeage
v. TMBC, LLC, 847 F.3d 992, 999 (8th Cir. 2017) (internal quotation omitted). GCAC has
not established the circuit court abused its discretion by concluding common liability issues
predominate. This Court expresses no opinion about whether the issue of damages will be
suitable for class treatment if a class is certified consistent with this opinion.
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Class Definition
When class certification is appropriate, Rule 52.08 presupposes a properly defined
class that is ascertainable and not overbroad. Coca-Cola, 249 S.W.3d at 861-62. A
properly defined class "is necessary to realize both the protections and benefits for which
the class action device was created." Id. at 861. A class definition encompassing "more
than a relatively small number of uninjured putative members is overly broad and
improper." Id.
As a threshold matter, Weatherspoon incorrectly argues that considering the
preclusive effect of final deficiency judgments or bankruptcy proceedings improperly
resolves the merits of the class action at the certification stage. "Although the class
certification decision is independent of the ultimate merits of the lawsuit, the applicable
substantive law is relevant to a meaningful determination of the certification issues."
Green v. Fred Weber, Inc., 254 S.W.3d 874, 880 (Mo. banc 2008); Amgen Inc. v.
Connecticut Ret. Plans & Tr. Funds, 568 U.S. 455, 466 (2013) ("Merits questions may be
considered to the extent—but only to the extent—that they are relevant to determining
whether the Rule 23 prerequisites for class certification are satisfied.").
Further, the Rule 52.08(b)(3) predominance and superiority analysis requires
consideration of "the extent and nature of any litigation concerning the controversy already
commenced by or against members of the class." Rule 52.08(b)(3)(B). Considering the
"nature and extent" of prior litigation involving individual class members is necessary to
determine whether the Rule 52.08 class certification requirements are satisfied and does
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not improperly resolve the merits of the claims of the class as a whole. 2 In this case, the
"extent and nature" of the litigation "already commenced . . . against members of the class"
is that GCAC obtained final deficiency judgments against approximately 60 percent of
class members while approximately 27 percent of class members extinguished their claims
in bankruptcy. The issue, then, is the preclusive effect of the prior deficiency judgments
and bankruptcy proceedings.
Deficiency Judgments: Res Judicata
Res judicata "precludes not only those issues on which the court in the former case
was required to pronounce judgment, but to every point properly belonging to the subject
matter of litigation and which the parties, exercising reasonable diligence, might have
brought forward at the time." Chesterfield Vill., Inc. v. City of Chesterfield, 64 S.W.3d
315, 318 (Mo. banc 2002) (internal quotation omitted). Res judicata "includes within its
ambit … a prohibition against collateral attack on a judgment." Wright v. Bartimus
Frickleton Robertson & Gorny PC, 364 S.W.3d 558, 564 (Mo. App. 2011). 3
2
Weatherspoon also asserts the "general rule" is that affirmative defenses against individual class
members do not defeat class certification. William B. Rubenstein, Newberg on Class Actions,
§ 4:55 (5th ed. 2011). This general rule is based on "the fact that a defense may arise and may
affect different class members differently does not compel a finding that individual issues
predominate over common ones." Bridging Cmtys. Inc. v. Top Flite Fin. Inc., 843 F.3d 1119, 1124
(6th Cir. 2016). Here, approximately 87 percent of the class members' claims are precluded by
prior final judgments or bankruptcy proceedings. Under this overly broad class definition, the
predominant common issue is that the vast majority of class members have no unresolved claim
against GCAC.
3
Determining whether res judicata applies typically requires analysis of whether the lawsuits share
four identities: "1) identity of the thing sued for; 2) identity of the cause of action; 3) identity of
the persons and parties to the action; and 4) identity of the quality of the person for or against
whom the claim is made." King Gen.Contractor, Inc. v. Reorganized Church of Jesus Christ Latter
Day Saints, 821 S.W.2d 495, 501 (Mo. Banc 1991). When a subsequent action constitutes a
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"A collateral attack is an attempt to impeach a judgment, whether interlocutory or
final, in a proceeding not instituted for the express purpose of annulling the judgment."
Beil v. Gaertner, 197 S.W.2d 611, 613 (Mo. 1946). A collateral attack is appropriate when
the underlying judgment is void, but a subsequent action "will not be tolerated as a
subterfuge or facade for litigating an issue to which a former final judgment is conclusive."
Flanary v. Rowlett, 612 S.W.2d 47, 50 (Mo. App. 1981) (declaratory judgment action
constituted an impermissible collateral attack upon final decree of dissolution).
The deficiency judgments against approximately 60 percent of the individual class
members established their indebtedness to GCAC following sale of the collateral securing
the loan. 4 The class action requests "damages equal to the amount of any judgment
wrongfully obtained by GCAC," an injunction requiring GCAC to "return any money
collected for deficiency judgments, time price differential, delinquency and collection
charges from Plaintiff and the classes," and a declaration that GCAC's form UCC notices
violate Missouri law. The class action, while "not instituted for the express purpose of
collateral attack on a prior judgment, the identities analysis is unnecessary. Wright, 364 S.W.3d
at 564.
4
"The right to a deficiency judgment accrues only when there is strict compliance with statutory
requirements." States Res. Corp. v. Gregory, 339 S.W.3d 591, 596 (Mo. App. 2011) (internal
quotation omitted). Section 408.556.1 required GCAC to "allege the facts of the borrower's
default, facts sufficient to show compliance with the provisions of sections 400.9-601 to
400.9-629, which provisions are hereby deemed applicable to all credit transactions[.]" Sections
400.9-601 to 400.9-629 govern the class claims regarding default, notice, repossession,
acceleration, sale, and the calculation of the deficiency. Further, § 408.556.2 provides "[a] default
judgment may not be entered in the action in favor of the lender unless the petition is verified by
the lender, or sworn testimony, by affidavit or otherwise, is adduced showing that the lender is
entitled to the relief demanded." Therefore, the deficiency judgments against 60 percent the
individual class members resolved the issue of GCAC's compliance with statutory requirements
relating to the repossession, sale of the collateral, and calculation of the deficiencies.
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annulling the judgment," Gaertner, 197 S.W.2d at 613, has precisely that effect because
the requested relief seeks to nullify and undermine the deficiency judgments previously
entered against class members. Therefore, approximately 60 percent of individual class
members' claims are impermissible collateral attacks on final deficiency judgments entered
against them. Those claims are precluded.
Weatherspoon asserts res judicata does not apply because GCAC obtained the
deficiency judgments in associate circuit divisions in which there is no compulsory
counterclaim rule. 5 If there is no compulsory counterclaim rule, res judicata generally does
not bar the assertion of that counterclaim in a subsequent action. Hemme v. Bharti, 183
S.W.3d 593, 599 (Mo. banc 2006). The general rule does not apply, however, when:
The relationship between the counterclaim and the plaintiff's claim is such
that successful prosecution of the second action would nullify the initial
judgment or would impair rights established in the initial action.
Restatement (Second) of Judgments § 22(2)(b) (1982). The failure to assert a counterclaim
in the first action will be given preclusive effect "when allowance of a subsequent action
would so plainly operate to undermine the initial judgment that the principle of finality
requires preclusion of such an action." Restatement (Second) of Judgments § 22, cmt. f.
In other words, the absence of a compulsory counterclaim rule does not sanction collateral
attacks on final judgments. The fact the final deficiency judgments were rendered in
5
Pleadings in associate circuit divisions are generally not subject to the Rule 55.32(a) compulsory
counterclaim rule. Becker Glove Intern., Inc. v. Jack Dubinsky & Sons, 41 S.W.3d 885, 888 (Mo.
banc 2001).
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proceedings in which no counterclaim was required does not justify a collateral attack on
those judgments in a subsequent class action. 6
Bankruptcy: Estoppel
Following repossession of their vehicles, approximately 27 percent of the putative
class members discharged their debts to GCAC in bankruptcy. Based on statistical
sampling, few, if any, class members disclosed the claims they now assert against GCAC
in their schedule of assets filed with the bankruptcy court, yet those claims would have
existed at the time of the bankruptcy. A provision in the bankruptcy code, 11 U.S.C. § 521,
imposes upon a debtor "an express, affirmative duty to disclose all assets, including
contingent and unliquidated claims." Strable v. Union Pac. R.R. Co., 396 S.W.3d 417, 422
(Mo. App. 2013) (internal quotation omitted). The failure to disclose potential claims
against a creditor estops the debtor from later asserting those claims. Id. at 422-23, 426.
Therefore, approximately 27 percent of individual class members' are estopped from
asserting their claims against GCAC in the class action.
The class definition is overbroad and otherwise deficient
Because approximately 87 percent of individual class members' claims are either
precluded by deficiency judgments or have been extinguished in bankruptcy, the vast
majority of individual class members have no unresolved claim against GCAC. Like Coca-
6
The fact many of the deficiency judgments were entered by default does not change the analysis.
Res judicata applies to final judgments entered by default. Drainage Dist. No. 1 Reformed v.
Matthews, 234 S.W.2d 567, 572-73 (Mo. 1950); State ex rel. Family Support Division v. Stovall-
Reid, 163 S.W.3d 519, 521-22 (Mo. App. 2005); State ex rel. Barnett v. Mullen, 125 S.W.3d 896,
899 (Mo. App. 2004).
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Cola, in which 80 percent of the putative class suffered no injury, the class definition in
this case is likewise overbroad. 249 S.W.3d at 862. The overly broad class definition is
not necessarily fatal, because an overly broad "class definition may be modified consistent
with the precepts of . . . Rule 52.08 in order to remove the uninjured putative members."
Id. at 861.
In addition, it is unclear why the court certified only a single subclass whose
members constitute only a subset of the members of the class. Normally, subclasses would
be differentiated by some distinct characteristic, such as one involving a voluntary and the
other an involuntary repossession or another differentiating characteristic. Here, however,
there is only one subclass, and it is for those whose vehicles were involuntarily repossessed.
It is unclear whether this single subclass was separated from the larger class and the
subclass members' interests may diverge from those who had their vehicles returned
voluntarily, such as Weatherspoon. As discussed below, this is the reason Weatherspoon
is an inappropriate class representative. The circuit court should carefully consider the
definition of those subclasses, if any, it may certify.
The circuit court is prohibited from taking any further action other than to decertify
the existing class, but it may consider whether to certify a class without the definition
problems here identified and that satisfies the typicality and other requirements for a class
action, as discussed below. 7
7
GCAC also asserts class certification was improper because the request for prejudgment interest
is barred by § 408.553, which GCAC maintains prohibits the accrual of interest after default and
before judgment. Unlike considering the preclusive effect of prior judgments and bankruptcy
proceedings to determine the scope of the class, GCAC's statutory interpretation argument
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Weatherspoon's claims are not typical of the class
Class actions are "an exception to the usual rule that litigation is conducted by and
on behalf of the individual named parties only." Gen. Tel. Co. of Sw. v. Falcon, 457 U.S.
147, 155 (1982) (internal quotation omitted). A class representative's claims must be
typical of the claims of the class. Rule 52.08(a)(3). To satisfy the typicality requirement,
the class representative "must be a part of the class and possess the same interest and suffer
the same injury as the class members." Falcon, 457 U.S. at 156 (internal quotation
omitted); Harris v. Union Elec. Co., 766 S.W.2d 80, 86 n.10 (Mo. banc 1989).
Weatherspoon's claims are not typical of the class because she did not suffer the
same alleged injury as the class members. The second class consists of individuals "who
had the possession of their collateral taken by GCAC involuntarily." Weatherspoon
testified she voluntarily surrendered her vehicle to GCAC. Further, as the class
representative, Weatherspoon requested "damages equal to the amount of any judgment
wrongfully obtained by GCAC" and "a mandatory injunction compelling GCAC to return
any money collected for deficiency judgments, time price differential, delinquency and
collection charges from Plaintiff and the classes." GCAC did not obtain a deficiency
attempts to resolve the merits of the class action at the certification stage. While this Court
expresses no opinion about the ultimate merits of Weatherspoon's claim for prejudgment interest,
a court may not refuse certification "on the ground that it thinks the class will eventually lose on
the merits." Loeb Indus., Inc. v. Sumitomo Corp., 306 F.3d 469, 480 (7th Cir. 2002).
GCAC also asserts class certification was improper because it did not send right-to-cure
notices. Weatherspoon asserts that, even if GCAC did not send improper notices, GCAC violated
§ 408.555 by improperly accelerating the loans and repossessing the collateral. This argument
also goes to the merits of the action, not the scope of the class.
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judgment against Weatherspoon. Weatherspoon's claim is not typical of the class because
she was not injured by an involuntary repossession or by a deficiency judgment.
The circuit court abused its discretion by certifying a class with Weatherspoon as
the sole class representative because her claims are not typical of the class and she is not a
member of the subclass. The circuit court is prohibited from certifying the class and
subclass as presently defined. The court is not prohibited from considering whether
Weatherspoon is typical of a redefined class, if a new class definition is proposed and meets
the criteria set out in the rule and explained in this opinion, nor is it prohibited from
appointing a new or additional class representative should one be proposed with claims
typical of the class and who otherwise satisfies the criteria set out in the rule.
Conclusion
The circuit court abused its discretion by certifying an overly broad class with a
class representative whose claims are not typical of the class. The preliminary writ of
prohibition is made permanent, and the circuit court is directed to take no action
inconsistent with this opinion.
__________________________
Zel M. Fischer, Chief Justice
All concur.
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