Chittur & Associates, P.C., New York (Krishnan S. Chittur of counsel), for appellants-respondents.
Moses & Singer, LLP, New York (Robert D. Lillienstein of counsel), for respondents-appellants.
Andrias, J.P., Acosta, Freedman, Richter, Gische, JJ.
Order, Supreme Court, New York County (Martin Shulman, J.), entered on or about July 18, 2012, which granted defendants' motion to decertify the class, denied plaintiffs' cross motion for partial summary judgment with respect to the liability of defendant Northern Leasing Systems, Inc. (Northern Leasing) for breach of contract, and denied defendants' order to show cause to prevent plaintiffs from making a second summary judgment motion, unanimously modified, on the law, to the extent of denying defendants' motion to decertify the class, and otherwise affirmed, without costs.
In this class action for, among other things, breach of contract, plaintiffs are small business owners who leased various types of "point of sale" credit card terminals from Northern Leasing. Plaintiffs allege that, without authorization, Northern Leasing charged them each $4.95 per month as a "fee" for waiving its requirement that the lessees insure the equipment against loss or damage and provide Northern Leasing with proof of insurance (the LDW fee).
The main factual dispute for the breach of contract claims is whether the lease provisions are set forth in a single page or whether the terms found on three additional pages are also clearly part of the agreement. The printed form leases that each named plaintiff signed vary slightly, but they share the following characteristics: each lease is printed on one sheet of paper, 11 inches wide by 17 inches long that is folded in half to create a booklet of four pages, each 8½ by 11 inches long. The form's front page provides spaces for handwritten information about, among other things, the business's owner, address, telephone number, and bank account, the equipment being leased, and the lease payment schedule. The page also contains printed terms and signature lines under which the owner accepts the lease and personally guarantees the lease obligations, a signature line for Northern Leasing, and a printed merger clause stating that lease terms represent the final expression of the parties' agreement. The phrase "Page 1 of 4" is printed in small typeface at the bottom, left-hand corner of the page, and a printed term refers to "paragraph 11 hereof, " which is not on the first page.
The second, third, and fourth pages do not contain any place for handwritten information and are entirely printed except for the handwritten signature line of the vendor who sold the equipment to Northern Leasing. The third page contains the paragraph 11 that is referenced on the first page, and a paragraph entitled "I[nsurance]" which, according to Northern Leasing, authorizes the LDW fee.
In 2004, the four named plaintiffs commenced this lawsuit on behalf of themselves and approximately 300, 000 small business merchants who had entered into leases with Northern Leasing. The relevant procedural history of this action is that in April 2009, the motion court granted plaintiffs' renewed motion for an order which, among other things, certified a class defined as all lessees and guarantors under the form lease who had paid LDW fees between certain dates (Pludeman v Northern Leasing Sys., Inc., 24 Misc.3d 1206 [A], 2009 NY Slip Op 51290[U] [Sup Ct, NY County 2009]). In June 2010, this Court unanimously modified the certification order by expanding the class, and rejected Northern Leasing's claim that certification was inappropriate because individual issues among the class members predominated over common issues (Pludeman v Northern Leasing Sys., Inc., 74 A.D.3d 420, 420-423 [1st Dept 2010]). Specifically, we found that the commonality requirement under CPLR 901(a)(2) was satisfied because Northern Leasing's liability for breach of contract "could turn on a single issue" that does not require individualized proof, namely, "whether it is possible to construe the first page of the lease as a complete contract because of the merger clause, signature lines, and the space for the detailing of fees" (id. at 424).
While the appeal from the class certification order was pending, the motion court granted plaintiffs' motion for partial summary judgment as to Northern Leasing's liability for breach of contract (Pludeman v Northern Leasing Sys., Inc., 27 Misc.3d 1203 [A], 2010 NY Slip Op 50530[U][Sup Ct, NY County 2010]). Without the guidance provided in our June 2010 order, the motion court granted plaintiffs' motion based on page 1's lack of any reference to the LDW fee or the "Insurance" provision (id. at *5). The court rejected Northern Leasing's argument that page 1's reference to paragraph 11, which is located on page 3, and the indication on the first page that it was "Page 1 of 4, " at the minimum create ambiguity as to whether pages 2, 3, and 4 are incorporated into the lease (id.).
In September 2011, this Court reversed the grant of partial summary judgment, holding that the record raised issues of fact (Pludeman v Northern Leasing Sys., Inc., 87 A.D.3d 881 [1st Dept 2011]). We specified that before granting summary judgment "a factfinder must determine (1) whether plaintiffs received only the first page of the form lease or all four pages, and (2) whether, if plaintiffs received all four pages, they could reasonably have believed that all terms were contained on page 1."
Based on our September 2011 decision, defendants moved to decertify the class, arguing, among other things, that the questions of fact we had identified required individualized proof for determination, and therefore the commonality and typicality prerequisites for class certification (CPLR 901[a] and ) could not be satisfied.
Plaintiffs opposed and by cross motion again sought partial summary judgment with respect to Northern Leasing's liability for breach of contract. Instead of claiming that the LDW fee was unauthorized because the "Insurance" provisions are not part of the leases, plaintiffs argued that the LDW program was a sham, that Northern Leasing lacked a good-faith basis for setting the charge at $4.95 per month, and that the amount was unreasonable. After plaintiffs cross-moved, Northern Leasing moved to deny the cross motion because there was no new evidence justifying a second summary judgment motion.
In July 2012, the motion court granted defendants' motion to decertify the class and denied both plaintiffs' and defendants' cross motions. With respect to the decertification motion, the court noted our statement, in modifying the class certification order, that liability "could turn on... whether it is possible to construe the first page of the lease as a complete contract" and that the issue could be determined "solely upon examination of the first page of the lease" (Pludeman, 74 A.D.3d at 424). However, the court thought that our September 2011 decision required individualized fact-finding and thus common issues no longer predominated.
The motion court misconstrued the September 2011 decision, which did not decertify the class. In the June 2010 decision, we affirmed that class certification was appropriate and identified the common issue that we thought predominated over individual issues, namely, whether plaintiffs were justified in assuming that the key contract terms were contained on the first page (74 A.D.3d at 424). By stating that this common issue "does not require individualized proof, and is capable of being determined solely upon examination of the first ...