Small businesses and business owners who leased “point of sale” credit and debit card processing equipment brought two related class claims against Leasing Defendants, a group of entities who financed their acquisition of such equipment.  As a matter of general background: Credit and debit card transactions are processed through financial networks called interchanges that are run by entities such as Visa and Mastercard. Financial institutions may become members of the interchange and can then sell card processing services directly to merchants or indirectly through entities known as Independent Sales Organizations (ISOs) and Merchant Service Providers (MSPs). ISOs and MSPs must be licensed and registered with the financial institutions and both Visa and Mastercard. Merchants must acquire specific equipment necessary to process credit and debit card transactions and must also pay a fee for each transaction.  The plaintiffs in this case allege that Leasing Defendants conspired with the “Merchant Service Defendants” (of ISOs and MSPs) to market fraudulent, long-term equipment leases and credit card processing services. In particular, Merchant Service Defendants sought merchants and induced them to enroll in such leases through “a series of deceitful misrepresentations and forged documents,” whereby merchants paid fees in excess of standard industry rates. The high lease costs did not pay for the equipment, but instead, primarily went toward Merchant Service Defendants’ commissions for securing the leases and toward Leasing Defendants’ profits.

Plaintiffs sought to certify an overarching class, including five discreet sub-classes, two of which were ultimately certified: (i) an SKS Post–Lease Expiration Class, against the Leasing Defendants, who allegedly conspired among themselves to defraud former lessee merchants by collecting or attempting to collect taxes that were not actually due or paid to any taxing authority; and (ii) a Property Tax Equipment Cost Basis Class, which alleges that the Leasing Defendants collected property taxes using an inaccurate methodology: rather than collecting property taxes based on the actual cost of equipment (Equipment Cost), calculated taxes using the stream of income generated by the lease (Acquisition Cost), which was generally much higher.

The Ninth Circuit affirmed certification of both classes.

As to the SKS Post–Lease Expiration Class, the defendants argued that the class representative’s claims were not typical, because claim is not typical of the class because Campbell’s legal theory is different from that of the class; her injuries are based on a different predicate act than the injuries of the class; her damages are different from those of the class; and she faces unique defenses.  The Court, however, rejected each of these arguments.  “Campbell is one of the merchants from whom Leasing Defendants made or attempted to make unauthorized ACH deductions. Plaintiffs presented evidence showing that Campbell was the personal guarantor of an expired lease; that she received a letter from SKS advising her that an audit was conducted and that she owed $85.50 for certain taxes and related fees; that she called Defendants and they informed her that she owed money; and that Defendants subsequently admitted that the amount they sought to collect from Campbell was inaccurate. Campbell’s claim is reasonably coextensive with that of the class because she alleges Leasing Defendants committed the same overall course of misconduct against other members of the class—seeking to collect alleged past taxes and fees through subterfuge and misrepresentation—and the class’s alleged injuries also resulted from that course of misconduct….  Campbell’s injuries stem from the same scheme, although the specific predicate act that caused her injury may differ from the acts that caused injury to other class members. Substantively, Campbell’s allegation of harm based on some of the activities comprising the RICO violation is sufficient…. Given the nature of RICO liability, the typicality requirement necessarily focuses on whether Campbell was injured by the same pattern of racketeering as the other class members….  It is true that Campbell’s account was not actually debited because it was closed, while members of the class did have funds debited from their bank accounts without authorization. Instead, Campbell alleges damages in the form of time taken off from work and payment to an assistant to research her financial records upon receiving the Notice of Debt. Plaintiffs describe the class’s injuries as: (1) the amounts Defendants debited from their bank accounts; and (2) costs class members incurred as a result of Defendants’ bogus collection efforts. Plaintiffs maintain that Campbell and the class were injured by the same course of conduct, and argue that the differences in the nature of the injuries are relevant only to the extent, and calculation, of damages…. The district court properly concluded that Campbell had standing to pursue the RICO claim because, although Defendants did not deduct money from her bank account, she spent time away from her usual work and paid an assistant to help her research and compile records responding to a fraudulent allegation. This amounted to a loss to business or property sufficient to confer standing.”

With respect to Predominance, the Court noted that: “Certainly some individual issues may arise in calculating damages, particularly for class members whose funds were never debited from their bank accounts. However, Plaintiffs generally will be able to show that their damages stemmed from the Leasing Defendants’ actions that created the legal liability. That some individualized calculations may be necessary does not defeat finding predominance. This case is unlike Comcast, where the Court noted that the courts below did not probe whether the damages model proposed in the antitrust class action measured damages attributable to the plaintiffs’ theory of harm. There, because the model proposed did not even attempt to measure only damages attributable to the legal theory, it could not possibly establish that damages are susceptible of measurement across the entire class.”  Here, by contrast: “Plaintiffs propose measuring damages that are directly attributable to their legal theory of the harm. If class members establish Leasing Defendants’ liability, damages can be calculated based on (1) the amount of fees, if any, deducted from their bank accounts after their leases were terminated using Leasing Defendants’ own records, and (2) expenses, if any, spent by class members in investigating the scheme using their own records. At this stage, Plaintiffs need only show that such damages can be determined without excessive difficulty and attributed to their theory of liability, and have proposed as much here.”

With respect to the issue of reliance, the Court found that, although there may be individualized issues relating to Campbell’s injury, they were secondary to the common class-wide issues presented, including “the propriety of Leasing Defendants’ simulation to determine whether taxes were due, whether class members’ ACH form agreements authorized the deductions after their leases had expired, and whether ACH processors relied on fraudulent misrepresentations by Leasing Defendants when they processed the debits.”

As to the Property Tax Equipment Class, the Leasing Defendants argued that the determination of the appropriate Acquisition Cost would require one to assemble the laws of 3,500 taxing jurisdictions. “But Plaintiffs do not argue that using the Acquisition Cost is wrong based on the laws of each taxing jurisdiction. Rather, they contend that Leasing Defendants breached their contracts by choosing to calculate taxes using the Acquisition Cost, rather than the Equipment Cost, as the base.”
Just Film, Inc. v. Buono, 847 F.3d 1108 (9th Cir. 2017).