IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Alpha Coles-Morgan, :
Plaintiff-Appellant, :
No. 04AP-203
v. :
(C.P.C. No. 03CVH03-3546)
Flagship Mortgage Corp. et al., :
(REGULAR CALENDAR)
Defendants-Appellees. :
D E C I S I O N
Rendered on June 16, 2005
Graham, McClelland, Ransbottom Co., LPA, Gary M. Sm
ith
and
James W. Ransbottom,
for appellant.
Lane, Alton & Horst, LLC, James C. Carpenter
and
Vincent I.
Holzhall; Douglas E. Curtis,
for appellees.
APPEAL from the Franklin County Court of Common Ple
as.
DESHLER, J.
{¶1}
Plaintiff-appellant, Alpha Coles-Morgan, appeals fr
om an order of the
Franklin County Court of Common Pleas denying her m
otion to certify a plaintiff class and
to pursue her action against defendants-appellees,
Flagship Mortgage Corp. ("Flagship")
and its president, Jeff Flees, as a representative
of that class.
{¶2}
Appellant initiated this action with a complaint se
tting forth four claims
against appellees arising out of a mortgage loan sh
e obtained from Flagship. The
No. 04AP-203
2
complaint set forth claims for breach of fiduciary
duty, fraud, violations of the Ohio
Consumer Sales Practices Act, and violations of the
Ohio Mortgage Brokers Act. The gist
of the complaint was that Flagship had made verbal
representations that appellant would
be granted a mortgage on the "best available terms,
" but instead offered her a mortgage
that included a "yield spread premium" paid to Flag
ship, representing in essence a bonus
paid to Flagship by the third-party lender for indu
cing appellant to enter into a loan on
terms more favorable to the lender and less advanta
geous for her.
{¶3}
Appellant filed a motion for class certification on
the basis that the mortgage
practices in question were widespread and other bor
rowers who had engaged in
transactions in which Flagship took a yield spread
premium on the transaction could most
efficiently and effectively have their claims adjud
icated as part of a class action. The trial
court denied appellant's motion for class certifica tion on the basis that appellant would not
be an appropriate class representative because her
son, Ryan Morgan, had negotiated
the mortgage loan transaction on her behalf and she
had relied upon him in her dealings
with Flagship. This created a conflict because Ryan
Morgan subsequently worked for
Flagship and, although not a named defendant in the
complaint, might eventually be put
in a position in which appellant would be less will
ing to prosecute the case at Ryan
Morgan's expense, even if it were in the interest o
f the rest of the members of the class.
The trial court also noted that proposed counsel fo
r the class action had represented
Ryan Morgan in other, unrelated matters.
{¶4}
Appellant has timely appealed from the trial court'
s denial of class
certification, and brings the following assignments of error:
No. 04AP-203
3
ASSIGNMENT OF ERROR I
The trial court abused its discretion and erred as
a matter of
law when it denied class certification on the basis
that Ms.
Coles-Morgan is not an adequate class representativ
e.
ASSIGNMENT OF ERROR II
The trial court abused its discretion and erred as
a matter of
law by denying class certification on the ground th
at Ms.
Coles-Morgan may not be an adequate representative.
The
standards of Civ.R. 23 required any doubts about ad
equate
representation or potential conflicts be resolved i
n favor of
upholding the class, subject to the trial court's a
uthority to
amend or adjust its certification order as developi
ng
circumstances demand, including the augmentation or
substitution of representative parties and ongoing
review by
the trial court and class counsel as the case devel
ops.
Baughman v. State Farm Mut. Auto. Ins. Co.
(2000), 88 Ohio
St.3d 480, 487;
Shaver v. Standard Oil Co.
(6
th
Dist. 1990),
68 Ohio App.3d 783, 799.
{¶5}
Class actions are governed by Civ.R. 23. The genera
l prerequisites to a
class action are set forth in Civ.R. 23(A):
One or more members of a class may sue or be sued a
s
representative parties on behalf of all only if (1)
the class is
so numerous that joinder of all members is impracti
cable, (2)
there are questions of law or fact common to the cl
ass, (3)
the claims or defenses of the representative partie
s are
typical of the claims or defenses of the class, and
(4) the
representative parties will fairly and adequately p
rotect the
interests of the class.
{¶6}
In addition, Civ.R. 23(B) sets forth various types
of class actions
maintainable once the prerequisites of Civ.R. 23(A) are met.
An action may be maintained as a class action if th
e
prerequisites of subdivision (A) are satisfied, and
in addition:
(1) the prosecution of separate actions by or again
st
individual members of the class would create a risk
of
No. 04AP-203
4
(a) inconsistent or varying adjudications with resp
ect to
individual members of the class which would establi
sh
incompatible standards of conduct for the party opp
osing the
class; or
(b) adjudications with respect to individual member
s of the
class which would as a practical matter be disposit
ive of the
interests of the other members not parties to the
adjudications or substantially impair or impede the
ir ability to
protect their interests; or
(2) the party opposing the class has acted or refus
ed to act
on grounds generally applicable to the class, there
by making
appropriate final injunctive relief or correspondin
g
declaratory relief with respect to the class as a w
hole; or
(3) the court finds that the questions of law or fa
ct common
to the members of the class predominate over any qu
estions
affecting only individual members, and that a class
action is
superior to other available methods for the fair an
d efficient
adjudication of the controversy. The matters pertin
ent to the
findings include: (a) the interest of members of th
e class in
individually controlling the prosecution or defense
of
separate actions; (b) the extent and nature of any
litigation
concerning the controversy already commenced by or
against members of the class; (c) the desirability
or
undesirability of concentrating the litigation of t
he claims in
the particular forum; (d) the difficulties likely t
o be
encountered in the management of a class action.
{¶7}
The Ohio Supreme Court has stated that a "trial jud
ge has broad discretion
in determining whether a class action may be mainta
ined and that determination will not
be disturbed absent a showing of an abuse of discre
tion."
Marks v. C.P. Chemical Co.
(1987), 31 Ohio St.3d 200, syllabus. "However, the
trial court's discretion in deciding
whether to certify a class action is not unlimited,
and indeed is bounded by and must be
exercised within the framework of Civ.R. 23. The tr
ial court is required to carefully apply
the class action requirements and conduct a rigorou
s analysis into whether the
No. 04AP-203
5
prerequisites of Civ.R. 23 have been satisfied."
Hamilton v. Ohio Savings Bank
(1998), 82
Ohio St.3d 67, 70, citing
General Telephone Co. of Southwest v. Falcon
(1982), 457 U.S.
147, 160-161, 102 S.Ct. 2364.
{¶8}
In interpreting and applying Civ.R. 23, the Ohio Su
preme Court has held
that, because the Ohio rule is virtually identical
with Fed.R.Civ.P. 23 on class actions,
"federal authority is an appropriate aid to interpr
etation of the Ohio rule."
Marks,
at 201. In
determining whether a case may be pursued as a clas
s action, the court shall not
consider the merits of the case except for the limi
ted purpose of determining whether the
requirements of Civ.R. 23 are met.
Falcon,
at 160.
{¶9}
The party pursuing certification of a class action
bears the burden of
showing by a preponderance of the evidence that the
prerequisites set forth in Civ.R. 23
are present, and that the action falls within one o
f the categories of Civ.R. 23(B).
State ex
rel. Ogan v. Teater
(1978), 54 Ohio St.2d 235, 247. The requirements of
the rule were
synthesized by the Ohio Supreme Court in
Hamilton,
at 71:
The following seven requirements must be satisfied
before
an action may be maintained as a class action under
Civ.R.
23: (1) an identifiable class must exist and the de
finition of
the class must be unambiguous; (2) the named
representatives must be members of the class; (3) t
he class
must be so numerous that joinder of all members is
impracticable; (4) there must be questions of law o
r fact
common to the class; (5) the claims or defenses of
the
representative parties must be typical of the claim
s or
defenses of the class; (6) the representative parti
es must
fairly and adequately protect the interests of the
class; and
(7) one of the three Civ.R. 23(B) requirements must
be met.
Civ.R. 23(A) and (B);
Warner v. Waste Mgt., Inc.
(1988), 36
Ohio St.3d 91, 521 N.E.2d 1091.
No. 04AP-203
6
{¶10}
The element at issue in the present case is the six
th under
Hamilton,
that is,
whether appellant can fairly and adequately protect
the interests of the class. "The
requirement for typicality is met where there is no
express conflict between the class
representatives and the class. Similarly, a represe
ntative is deemed adequate so long as
his or her interest is not antagonistic to that of
other class members."
Hamilton,
at 77-78.
In the present case, while we find that the typical
ity requirement is not particularly at
issue, we agree with the trial court that the poten
tial conflict between the interests of
appellant in this litigation and that of other clas
s members makes her an inadequate class
representative for the litigation as it is presentl y projected in this case.
{¶11}
Appellant does not dispute that she, during her neg
otiations with Flagship,
left the entire loan transaction in the hands of he
r son. In her deposition testimony,
appellant concedes that she did not review the loan
summary documents or settlement
statement prior to closing, allowing her son to do
so. She did not discuss the terms of the
loan with her son because she trusted his judgment.
Appellant never communicated
personally with Flees, nor did she personally recei
ve the alleged oral misrepresentations
communicated by Flagship's employee in charge of th
e loan, Gordon Woodson.
Appellant's testimony is that all of her informatio
n and communication about the mortgage
loan came to her through Ryan Morgan's statements.
The proposed class action
complaint identifies two "class periods," March 25,
1998 to the present, and March 25,
2001 to the present. It is conceded that, during at
least one of these class periods, Ryan
Morgan worked for Flagship, Flees, and Woodson, who
apparently had been impressed
enough with Ryan Morgan's conduct while obtaining a
loan for his mother to offer him
No. 04AP-203
7
employment with Flagship. Because Ryan Morgan's emp
loyment with Flagship means
that the proposed class representative's son is pot
entially aligned with the defendant
corporation in the matter, we find that in the pres
ent case the trial court could properly
determine that the class representative's interest
was "antagonistic to that of other class
members."
Warner v. Waste Management, Inc.
(1988), 36 Ohio St.3d 91, 98. While
appellant argues that the conflict is only potentia
l in this stage of the litigation and that the
trial court should have resolved any doubts about c
lass representation in favor of
upholding the class,
Baughman v. State Farm Mut. Auto. Ins. Co.
(2000)
,
88 Ohio St.3d
480, 487-488, and amended or adjusted a certificati on order as developing circumstances
required including substitution of representative p
arties, id., the conflict in the present
case is certain and apparent enough for the trial c
ourt to, within its discretion, choose to
avoid certifying the class entirely. A trial court
has wide latitude in the procedural
management of the proceedings before it, and we do
not find that the trial court's position
that the class should not be certified under the pr
esent circumstances represented an
arbitrary or unconscionable determination. We therefore find no abuse of discretion on the
part of the trial court in declining to certify the
class based on appellant's adequacy as a
representative.
{¶12}
The trial court also in its decision noted that the
re appear to be doubts
about the adequacy of class counsel based upon coun
sel's representation of Ryan
Morgan in other matters. The trial court's determin
ation in this respect was not fully
developed in its decision. Under Civ.R. 23(A)(4), a
dequacy of representation is divided
into two components, consisting of the adequacy of
the representative and adequacy of
No. 04AP-203
8
counsel.
Marks,
at 203. The record reveals nothing in the conduct o
f the litigation before
the trial court or in this appeal that would indica
te that counsel for appellant is not, as a
matter of professional competence, able to undertak
e adequate representation of the
class. The sole difficulty appears to be counsel's
representation of Ryan Morgan in other
matters. The scope and implications of that represe
ntation were not fully developed
before the trial court, and the trial court in its
decision is not explicit on the question of
whether counsel is inadequate only because appellan
t is class representative, or whether
counsel could adequately represent the class if ano
ther representative was substituted.
Because it is not clear that the trial court intend
ed to find that proposed class counsel was
inadequate under all circumstances, we decline to a
ffirm or reverse a ruling that the trial
court may not have made. The record reveals that mo
tions are pending before the trial
court to substitute a different class representativ
e, depending upon the outcome of this
appeal. Because we expressly make no ruling upon th
e adequacy of class counsel if a
different class representative is substituted, the
trial court may make a determination on
this question as a question of first impression in
the case upon remand.
{¶13}
In the same vein, we note that Flagship has taken t
he precaution of
vigorously arguing in this appeal all the other req
uired elements of the class action
enumerated in
Hamilton,
supra. The trial court clearly has yet to address a
ny of these
issues and accordingly these arguments against cert
ification of the class will not be
addressed in this decision.
{¶14}
In accordance with the foregoing, appellant's two a
ssignments of error are
overruled and the judgment of the Franklin County C
ourt of Common Pleas denying
No. 04AP-203
9
certification of the plaintiff class on the grounds
that appellant is not an adequate class
representative is affirmed. The trial court will cl
arify its decision on the adequacy of
putative class counsel when addressing the matter u
pon remand. The matter is
remanded for further proceedings in accordance with law and this decision.
Judgment affirmed;
case remanded.
KLATT and SADLER, JJ., concur.
DESHLER, J., retired, of the Tenth Appellate Distri
ct,
assigned to active duty under authority of Section
6(C),
Article IV, Ohio Constitution.
_________________