Ford Motor Credit Co. v. Agrawal

71 N.E.3d 671

2016 Ohio 5928

FORD MOTOR CREDIT COMPANY, Plaintiff–Appellant/Counter–Defendant

v.Sudesh AGRAWAL, Defendant–Appellee/Counter–Plaintiff.

No. 103667.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Sept. 22, 2016.

Brett K. Bacon, Gregory R. Farkas, Colleen C. Murnane, Frantz Ward, L.L.P., Cleveland, OH, Brian D. Boyle, O'Melveny & Myers, L.L.P., Washington, D.C., Warren E. Platt, Snell & Wilmer, Phoenix, AZ, for appellant.

Patrick J. Perotti, Dworken & Bernstein Co., L.P.A., Painesville, OH, Robert S. Belovich, Broadview Heights, OH, Anand N. Misra, The Misra Law Firm, L.L.C., Cleveland, OH, for appellee.

Mike DeWine, Ohio Attorney General By: Robert C. Maier, Assistant Attorney General, Christine T. Mesirow, Assistant Attorney General, Columbus, OH, for Department of Taxation.

Before: KEOUGH, P.J., S. GALLAGHER, J., and CELEBREZZE, J.

KATHLEEN ANN KEOUGH, P.J.

{¶ 1} Plaintiff/counter-defendant, Ford Motor Credit Company ("Ford Credit"), appeals from the trial court's judgment granting the motion of defendant/counter-plaintiff, Sudesh Agrawal, for class certification of a nationwide class and an Ohio subclass under Civ.R. 23(B)(2) and (3). Ford Credit argues that the trial court erred in granting class certification because Agrawal's claims and Ford Credit's defenses require individualized inquiries that preclude classwide adjudication. Finding merit to the appeal, we reverse and remand for proceedings consistent with this opinion.

I. Facts and Procedural History

{¶ 2} The facts of this case were set forth in Ford Motor Credit Co. v. Agrawal, 8th Dist. Cuyahoga No. 96413, 2011-Ohio-6474, 2011 WL 6317451 ("Agrawal I ") as follows:

The controversy arises from Agrawal's lease of a Windstar minivan from a Ford dealer under Ford Credit's Red Carpet Lease ("RCL") program in 2000. Lease provisions under the RCL program specify that lessees "may be charged for excessive wear based on our standards for normal use " and that the lessee is "responsible for repairs of All Damages which are not a result of normal wear and use * * *. You will pay the estimated costs of such repairs, even if the repairs are not made prior to Holder's sale of the Vehicle." (Emphasis added.)

Since 2006, Ford Credit has used third-party inspectors to inspect leased vehicles for excess wear and use ("EWU") at lease end. Prior to 2006, including when Agrawal returned his vehicle in 2003, Ford dealers across the country performed those inspections using Ford Credit guidelines and templates.

The RCL dealer handbook, one such procedure document, is given to Ford dealers or is available to them through Ford Credit's website. Additionally, Ford Credit provides templates to its dealers for use in performing wear and use inspections. The handbook instructs inspectors that "the ‘inspection standard’ is equivalent to a ‘clean’ rather than ‘average’ used vehicle." Internal Ford Credit documents explain that "clean" means the "vehicle is in great condition with only minor dents and chips in body panels," whereas "average" means the "vehicle will have normal wear and tear with dents, chips and scratches in body panels."

The program's lease-end process requires the lessee to present the leased vehicle to a Ford dealer for an EWU inspection. The dealer-inspector then conducts the inspection in accordance with Ford Credit's instructions and enters the result on a Ford Credit form called the Vehicle Condition Report ("VCR"), which has seven carbon plies. Plies one through three are identical, but are different from plies four through seven, which provide columns for additional inspections. The lessee receives ply two, which does not show the columns for additional inspections.

The results of the dealer-inspector's findings are entered in column one of the VCR. Body shop personnel then enter cost estimates for each condition noted by the dealer-inspector. This dealer inspection is referred to as the "First Inspection."

Following the First Inspection, the dealer-inspector sends Ford Credit the VCR, along with any funds collected from the lessee. Ford Credit then includes any unpaid but assessed EWU charges in a final bill sent to the lessee.

Next, the vehicle is transported from the dealer to an auction location. While in transport, another inspection is made by the transport; the purpose of which is to check for any damage that may occur during transportation. No cost estimates are made for the transport-inspection, nor are Ford inspection guidelines used. The results of this transporter-inspection are then entered in column two of the VCR.

Pursuant to the RCL handbook, the "dealer will be financially responsible for any under reported excess wear and use charges." If the EWU charges are over reported, the dealer has no corresponding responsibility. Ford Credit's standard operating procedures prescribe a "Second Inspection" in order to determine whether the dealer has "under reported" the EWU charges during the First Inspection.

Therefore, once the vehicle is delivered to the auctioneer, another inspection and estimate is made. This inspection is performed according to Ford Credit's guidelines. The purpose of this inspection is "to insure that the dealer has actually followed the standards of wear and use." The auctioneer-inspection results, along with cost estimates, are entered into column three of the VCR. The auction-inspector then computes a difference between the First Inspection and the Second Inspection and enters the amount into the VCR. If the variance shows an underestimate, then a further verifying inspection is conducted by a "Senior Auction Inspector." No such verifying inspection occurs when the dealer estimate is greater than the auction estimate. If the variance is confirmed by the Senior Auction Inspector to be $200 or more, then this variance becomes the basis for imposing financial responsibility on the dealer-inspector.

Agrawal returned his vehicle to the Ford dealership in May 2003, after making all monthly payments on his lease. Upon inspecting his vehicle, the Ford dealer estimated EWU charges of $2,658. Following the First Inspection, and unbeknownst to Agrawal, a Second Inspection found EWU charges in the amount of $194. However, Ford Credit, utilizing the initial estimate, billed Agrawal $2,658.

Agrawal disputed the charges and, on March 11, 2004, Ford Credit filed this action in the Shaker Heights Municipal Court, seeking $2,658 in unpaid EWU charges. Agrawal filed a counterclaim against Ford Credit on June 7, 2004. The case was transferred to the Cuyahoga County Court of Common Please based on Agrawal's request for damages in excess of the municipal court's jurisdiction.

On February 16, 2006, Agrawal amended his original counterclaim, asserting eight claims against Ford Credit based on Ford Credit's assessment of EWU charges: (1) a class claim for "unconscionable leasing practices"; (2) a class claim for violation of public policy; (3) a class claim for breach of contract; (4) a class claim for violation of the federal Consumer Leasing Act ("CLA"), 15 U.S.C. Section 1667a ; (5) a class claim for fraud; (6) a class claim for unfair and deceptive trade practices; (7) a claim for unlawful tax, which later was dismissed voluntarily; and (8) an individual claim for violation of the Ohio Consumer Sales Practices Act, R.C. 1345.01.

Agrawal's princip[al] allegations underlying the class claims are that the "normal" standard stated in Ford Credit's lease is different than the "clean" standard stated in Ford's RCL dealer handbook. He points to Ford documents to show that "clean" is a more stringent standard than "average," which is defined as having "normal wear and tear." Thus, Agrawal argues that Ford Credit misrepresents the applicable standard in the lease and correspondingly fails to conduct an inspection in accordance with the standard stated in the lease. Agrawal further alleges that Ford Credit's operating procedure requiring the dealer to be responsible only for underestimates creates incentives for the First Inspection to be biased towards an overcharge. Moreover, he argues that the fact that Ford Credit requires the related Second Inspection demonstrates the biased nature of the First Inspection.

Id. at ¶ 2–14.

{¶ 3} In 2011, the trial court granted class certification of Agrawal's claims, certifying a nationwide class and an Ohio subclass under Civ.R. 23(B)(2) and (3). In Agrawal I, this court affirmed the trial court's judgment granting class certification of a nationwide class and Ohio subclass but reversed class certification of Agrawal's claim for actual damages under the CLA.

{¶ 4} Ford Credit sought review in the Ohio Supreme Court, which held the case pending its decision regarding class certification issues in Cullen v. State Farm Mut. Auto. Ins. Co., 137 Ohio St.3d 373, 2013-Ohio-4733, 999 N.E.2d 614. Upon its reversal of the class certification in Cullen, the Ohio Supreme Court reversed this court's judgment in Agrawal I on the authority of Cullen. Ford Motor Credit Co. v. Agrawal, 137 Ohio St.3d 561, 2013-Ohio-5199, 2 N.E.3d 238. Upon remand from the Ohio Supreme Court, this court reversed the judgment of the trial court granting class certification and remanded the matter to the trial court for further proceedings in light of Cullen. Ford Motor Credit Co. v. Agrawal, 8th Dist. Cuyahoga No. 96413, 2014-Ohio-920, 2014 WL 1344481.

{¶ 5} Upon remand, Ford Credit expanded the record by producing a large sample of VCRs that were prepared by dealers when lessees returned their vehicles. Ford Credit also produced an expert report describing the variations in the conditions of individual vehicles as determined by the lease-end inspections. Agrawal did not produce any additional discovery material or expand the class record. He filed a renewed motion to certify the same proposed classes that had been previously certified by the trial court.

{¶ 6} Upon re-examining the issue of class certification in light of Cullen, the trial court...