Indus. Welding Supplies of Hattiesburg, LLC v. Pinson

2019 Ark. 325

587 S.W.3d 540

INDUSTRIAL WELDING SUPPLIES OF HATTIESBURG, LLC; Airgas, Inc.; and Airgas USA, LLC, Appellants

v.John PINSON and Larry Murphy on Behalf of Themselves and All Others Similarly Situated, Appellees

No. CV-19-175

Supreme Court of Arkansas.

Opinion Delivered: November 14, 2019

Thomas S. Stone, Little Rock, Todd Wooten, and Carl F. "Trey" Cooper III, Little Rock, for appellant Industrial Welding Supplies of Hattiesburg, LLC.

McMath Woods, P.A., by: Charles Harrison, Little Rock, and Neil Chamberlin, Jacksonville, for appellees.

JOHN DAN KEMP, Chief Justice

Appellant Industrial Welding Supplies of Hattiesburg, LLC ("Industrial Welding"), appeals an amended order of the Union County Circuit Court certifying a class pursuant to Arkansas Rule of Civil Procedure 23. For reversal, Industrial Welding argues that the circuit court abused its discretion by granting a motion for class certification filed by appellees John Pinson, Larry Murphy, and all others similarly situated (collectively "employees") because they failed to meet their burdens of proof as to the commonality, predominance, and superiority requirements for class certification.¹ We affirm.

The facts of the case are sufficiently set forth in Industrial Welding Supplies of Hattiesburg, LLC v. Pinson , 2017 Ark. 315, 530 S.W.3d 854 ( Industrial Welding I ). In short, the employees filed their complaint in the Union County Circuit Court alleging breach of contract and unjust enrichment based on Industrial Welding's failure to compensate them for earned but unused vacation time. Id. at 2, 530 S.W.3d at 856. The employees argued that each member of the proposed class worked for Industrial Welding during the 2011 calendar year and earned vacation benefits that were due to be paid in 2012. Id. , 530 S.W.3d at 856. The employees also named Airgas as a defendant because Airgas acquired Industrial Welding effective April 1, 2012. Id. , 530 S.W.3d at 856.

In support of their claims, the employees relied on several documents, including the section of the "Nordan Smith Employee Policies and Guidelines Manual" that addressed vacation schedules.² That section stated that

[a]n employee becomes eligible for vacation upon completion of twelve (12) months of continuous service with the company.

Each employee earns vacation time as follows:

1 week after one year of service

2 weeks after two years of service

3 weeks after ten years of service

....

In addition, if an employee resigns, is laid-off, or is terminated, that employee will be paid for unused earned vacation time for the calendar year of the occurring event.

The employees also cited contracts and noncompete agreements between Industrial Welding and one or more of its employees, stating that "[t]he Employee shall be entitled to an annual vacation, as is determined by existing company policy." Additionally, they relied on a March 23, 2012 memo from Industrial Welding stating, "Vacation: 25% of your unused vacation (representing vacation acrued [sic] from January 1 through March 31) will be paid to you on your final Nordan Smith payroll check." Finally, the employees pointed to an April 3, 2012 letter from Airgas to the employees, which stated, "Your earned but unused vacation through March 30, 2012 will be paid out to you by Nordan Smith." Based on these claims and supporting documentation, the employees sought and were granted class-action status. Id. at 4, 530 S.W.3d at 857.

In Industrial Welding I , we remanded with instructions to enter an order that complied with Rule 23 because the order failed to define the class claims, issues, or defenses. Id. at 7, 530 S.W.3d at 859. On remand, the circuit court entered an amended order granting class certification. It ruled that

[t]he class consists of all persons who were employed by Industrial Welding Supplies of Hattiesburg, LLC on December 31, 2011, were so employed for at least one year prior thereto, and continued to be so employed until Industrial Welding Supplies of Hattiesburg, LLC was acquired by Airgas USA, LLC on March 31, 2012.

Industrial Welding timely filed an interlocutory appeal from the circuit court's amended order.

I. Standard of Review

Class certification is governed by Arkansas Rule of Civil Procedure 23. See ChartOne, Inc. v. Raglon , 373 Ark. 275, 279, 283 S.W.3d 576, 580 (2008). Circuit courts are given broad discretion in matters regarding class certification, and we will not reverse a circuit court's decision to grant or deny class certification absent an abuse of discretion. Id. , 283 S.W.3d at 580. When reviewing a class-certification order, we review the evidence contained in the record to determine whether it supports the circuit court's decision. Id. , 283 S.W.3d at 580. Our focus is whether the Rule 23 requirements are met, and it is totally immaterial whether the petition will succeed on the merits or even if it states a cause of action. Philip Morris Cos., Inc. v. Miner , 2015 Ark. 73, at 3, 462 S.W.3d 313, 316. This court will not delve into the merits of the underlying claims when deciding whether the Rule 23 requirements have been met. Nat'l Cash, Inc. v. Loveless , 361 Ark. 112, 116, 205 S.W.3d 127, 130 (2005). The six requirements for class-action certification, as stated in Rule 23, are (1) numerosity, (2) commonality, (3) typicality, (4) adequacy, (5) predominance, and (6) superiority. See Gen. Motors Corp. v. Bryant , 374 Ark. 38, 42, 285 S.W.3d 634, 637 (2008).

II. Points on Appeal

Industrial Welding contends that the circuit court's decision to grant the employees' amended motion for class certification should be reversed because, on their claims for breach of contract and unjust enrichment (1) they failed to meet their burden of proof as to the commonality requirement; (2) individual issues predominate over any common issues, and therefore, they failed to meet their burden of proof as to the predominance requirement; and (3) a class action is not the superior means of resolving their contractual dispute with Industrial Welding.

A. Breach-of-Contract Claim

1. Commonality

Industrial Welding argues that the circuit court abused its discretion in finding that the employees met the commonality requirement because its liability to any individual employee turns on whether there was an enforceable contractual obligation concerning vacation time between it and that employee. The employees contend that the circuit court did not abuse its discretion because the issue of contractual liability is common to all class members.

Rule 23(a)(2) requires the circuit court to determine whether there are questions of law or fact common to the class. Union Pac. R.R. v. Vickers , 2009 Ark. 259, at 8, 308 S.W.3d 573, 578. Under our case law, this requirement is case-specific. Id. Additionally, we have held that

Rule 23(a)(2) does not require that all questions of law or fact raised in the litigation be common. The test or standard for meeting the rule 23(a)(2) prerequisite is ... there need be only a single issue common to all members of the class ... When the party opposing the class has engaged in some course of conduct that affects a group of persons and gives rise to a cause of action, one or more of the elements of that cause of action will be common to all of the persons affected.

Id. at 7, 308 S.W.3d at 578. Commonality is satisfied when the defendant's acts, independent of any action by the class members, establish a common question relating to the entire class. Robinson Nursing & Rehab. Ctr., LLC v. Phillips , 2017 Ark. 162, at 7, 519 S.W.3d 291, 297.

In Williamson v. Sanofi Winthrop Pharmaceuticals, Inc. , 347 Ark. 89, 96, 60 S.W.3d 428, 432 (2001), on which Industrial Welding relies extensively, we affirmed the denial of a class certification in a breach-of-contract case because of a lack of commonality. Id. at 97, 60 S.W.3d at 433. There, a group of salesmen alleged that they had been wrongfully denied bonuses under an incentive program. The salesmen's claim of entitlement to bonuses was based on incorrect reports prepared by a third party and oral representations made by management. The salesmen filed a class-action breach-of-contract complaint against their employer. Id. , 60 S.W.3d at 433.

In affirming the circuit court's refusal to certify the class because it lacked commonality, we reasoned that "before even reaching any common question about breach of contract, each potential class member would have to establish the existence of a contract between himself and [the employer.]" Id. at 97, 60 S.W.3d at 433. Each salesman was given different and contradictory documents concerning the incentive program, and oral representations had been made to some but not all salesmen. Id. at 100, 60 S.W.3d at 435. In concluding that a class action would be improper, we stated that "the court would be required to take proof from each class member to determine his or her understanding about the existence of a contract." Id. , 60 S.W.3d at 435. Such a procedure rendered a class action "impractical due to the lack of common questions." Id. at 101, 60 S.W.3d at 435.

In City of Conway v. Shumate , 2017 Ark. 36, 511 S.W.3d 319, we again analyzed commonality in a breach-of-contract action. There, a police officer and a firefighter filed a class-action suit against the City, claiming that revenue from a 2001 sales-tax resolution was intended to exclusively fund the salaries of city employees. Id. at 2, 511 S.W.3d at 322. The City established a pay grid to implement and codify the improved salary structure and gave raises pursuant to the pay grid from 2001 to 2009 but paid no increases since 2009. Id. at 2, 511 S.W.3d at 322. The circuit court found a common issue was whether the City's failure to pay the increase was a breach of contract. Id. at 5, 511 S.W.3d at 324. In rejecting the City's reliance on Williamson , we held that, "[b]ased on various affidavits in the record and the structure of the plaintiffs' complaint, the nature of the dispute here is not...