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Red Barn Motors, Inc. v. Nextgear Capital, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

January 12, 2018

RED BARN MOTORS, INC., PLATINUM MOTORS, INC., and MATTINGLY AUTO SALES, INC., Plaintiffs,
v.
NEXTGEAR CAPITAL, INC. f/k/a DEALER SERVICES CORPORATION, COX ENTERPRISES, INC., COX AUTOMOTIVE, INC., and JOHN WICK, Defendants.

          ORDER ON PENDING MOTIONS

          TANYA WALTON PRATT, JUDGE

         This matter is before the Court on a Motion to Reconsider and/or Modify Class Certification Order (“Motion to Reconsider”) filed by Defendants NextGear Capital, Inc., formerly known as Dealer Services Corporation (“NextGear”), Cox Automotive, Inc., and John Wick (collectively, “Defendants”) (Filing No. 228); Defendants' Motion to Modify Class Certification Order to Narrow Class (“Motion to Narrow Class”) (Filing No. 237); Defendants' Objections to Magistrate Judge's Orders (Filing No. 240; Filing No. 255); and a Motion to Proceed with Class Notice filed by Plaintiffs Red Barn Motors, Inc., Platinum Motors, Inc., and Mattingly Auto Sales, Inc. (collectively, “Plaintiffs”) (Filing No. 249).

         The Plaintiffs each executed a separate contract with NextGear, whereby the Plaintiffs were provided lines of credit for financing their used car dealership operations. After the Plaintiffs discovered that they had been charged interest and fees on money that had not yet actually been paid on their behalf, they initiated this lawsuit against the Defendants, asserting claims for breach of contract, constructive fraud, unjust enrichment, tortious interference, violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., and a RICO conspiracy. Following the Defendants' motion to dismiss the Plaintiffs' claims, the Court dismissed the unjust enrichment, tortious interference, and RICO conspiracy claims. The Court also dismissed the breach of contract and constructive fraud claims against Cox Automotive and Mr. Wick and all claims against Defendant Cox Enterprises, Inc. (Filing No. 186 at 42).

         The Plaintiffs sought class certification on their claims for a class involving “[a]ll used car dealers in the United States of America that were parties to a Floorplan Agreement with DSC, n/k/a NextGear, effective during the time period of January 2005 through July 2013.” (Filing No. 165 at 2.) The Court granted class certification on the Plaintiffs' breach of contract claim against NextGear and the substantive RICO claim against NextGear, Cox Automotive, and Mr. Wick, but class certification was denied on the constructive fraud claim. The certified class was defined as “all used car dealers in the United States of America that were parties to a Floorplan Agreement with DSC, n/k/a NextGear, effective during the time period of January 2005 through July 2013, ” with a subclass for “all California used car dealers that were parties to a Floorplan Agreement with DSC, n/k/a NextGear, effective during the time period of January 2005 through July 2013, which Floorplan Agreement requires the application of California law.” (Filing No. 220 at 40.)

         In their Motion to Reconsider, the Defendants ask the Court to decertify the class, arguing that the Court failed to consider evidence and arguments presented after the initial class certification briefing. In their Motion to Narrow Class, the Defendants ask the Court to modify the class to exclude any car dealers that entered into floorplan agreements in 2013, which supersede prior agreements and require arbitration and waive participation in class actions. In their Objections to Magistrate Judge's Orders, the Defendants ask the Court to vacate the Magistrate Judge's Orders denying a stay of class discovery and denying a stay of class notice. In the Plaintiffs' Motion to Proceed with Class Notice, they ask the Court for permission to move forward with providing notice to class members. The Court will address each Motion in turn.

         I. LEGAL STANDARD

         Although the Defendants filed their Motion to Reconsider under Rule 59(e) of the Federal Rules of Civil Procedure, the Motion is properly classified as a motion to reconsider under Rule 54(b) because no final judgment has been entered in this case. See Fed. R. Civ. P. 54(b) (“any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities”). Regardless, the Court applies a similar standard as applied to motions to alter or amend a judgment under Rule 59(e). See Katz-Crank v. Haskett, 2014 U.S. Dist. LEXIS 95144, at *6 (S.D. Ind. July 14, 2014); Woods v. Resnick, 725 F.Supp.2d 809, 827- 28 (W.D. Wis. 2010).

         Motions to reconsider filed pursuant to Rule 54(b) or Rule 59(e) are for the purpose of correcting manifest errors of law or fact or to present newly discovered evidence not available at the time of briefing. Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 954 (7th Cir. 2013); State Farm Fire & Cas. Co. v. Nokes, 263 F.R.D. 518, 526 (N.D. Ind. 2009). The motion is to be used “where the Court has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension.” Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990) (citation omitted). A manifest error “is not demonstrated by the disappointment of the losing party. It is the wholesale disregard, misapplication, or failure to recognize controlling precedent.” Oto v. Metropolitan Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) (citation and quotation marks omitted). Additionally, “[r]econsideration is not an appropriate forum for rehashing previously rejected arguments or arguing matters that could have been heard during the pendency of the previous motion.” Ahmed v. Ashcroft, 388 F.3d 247, 249 (7th Cir. 2004) (citation and quotation marks omitted).

         Because this is a class action, the Court balances the above standard with Rule 23(c)(1)(C), which states, “[a]n order that grants or denies class certification may be altered or amended before final judgment.” “[A] district court has broad discretion to determine whether certification of a class is appropriate.” Retired Chicago Police Ass'n v. City of Chicago, 7 F.3d 584, 596 (7th Cir. 1993). Under Rule 23(c)(1)(C), the Court retains authority to modify or vacate a class certification at any time prior to final judgment. “[T]he district court has the power at any time before final judgment to revoke or alter class certification if it appears that the suit cannot proceed consistent with Rule 23's requirements.” Alliance to End Repression v. Rochford, 565 F.2d 975, 977 (7th Cir. 1977).

         “[A] favorable class determination by the court is not cast in stone. If the certification of the class is later deemed to be improvident, the court may decertify, subclassify, alter the certification, or permit intervention.” Eggleston v. Chicago Journeymen Plumbers' Local Union No. 130, 657 F.2d 890, 896 (7th Cir. 1981) (citations omitted); see also Ellis v. Elgin Riverboat Resort, 217 F.R.D. 415, 419 (N.D. Ill. 2003) (“the court's initial certification of a class ‘is inherently tentative'”) (citation omitted).

Classes are certified early in a suit. Fed.R.Civ.P. 23(c)(1)(A). All certifications are tentative. Fed.R.Civ.P. 23(c)(1)(C). If the evidence calls into question the propriety of defining a class in a particular way, then the definition must be modified or subclasses certified. A class defined early in a suit cannot justify adjudicating hypothetical issues rather than determining the legality of what actually happens.

Fonder v. Sheriff of Kankakee Cty., 823 F.3d 1144, 1147 (7th Cir. 2016).

         II. DISCUSSION

         The resolution of four of the pending motions-Motion to Narrow Class, the two Objections to Magistrate Judge's Orders, and Motion to Proceed with Class Notice-can be determined by the resolution of the Motion to Reconsider. Therefore, ...


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