IN THE SUPREME COURT OF PENNSYLVANIA EASTERN DISTRICT
June 22, 2009
SANDRA J. BASILE AND LAURA CLAVIN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLEES
H&R BLOCK, INC.; H&R BLOCK EASTERN TAX SERVICES, INC., & MELLON BANK (DE) NATIONAL ASSOCIATION, APPELLANTS
Appeal from the Order of Superior Court entered June 4, 2007 reversing the Order of the Court of Common Pleas of Philadelphia County entered January 21, 2004 926 A.2d 493 (Pa. Super. 2007).
The opinion of the court was delivered by: Madame Justice Greenspan
CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, GREENSPAN, JJ.
ARGUED: September 9, 2008
We decide whether the Appellants, H & R Block, Inc. and H & R Block Eastern Tax Services, Inc. (collectively referred to as "Block"), properly preserved their right to challenge certification of a class represented by Appellee Sandra Basile. Here, the Superior Court held that Block waived its right to seek decertification of the class because it did not timely challenge the order granting class certification, even though Block ultimately won a later motion for summary judgment on the merits of the dispute. Our careful review of the facts and law reveals the Superior Court erred and we therefore reverse.
On April 23, 1993, Sandra J. Basile filed a lawsuit against Block, alleging that, among other things, Block breached its fiduciary duty in connection with its "Rapid RefundÔ" program. The Rapid Refund program allowed individuals to receive their income tax refund within days after electronically filing their income tax return by receiving a short-term loan from Mellon Bank. Basile alleged that Block thus deceived customers because the customers did not know they were receiving a short-term loan from Mellon Bank and the fees imposed by Block were actually extremely high interest rates on the short-term loan. Basile specifically alleged that she believed she received an expedited refund because she electronically filed the return and was not aware it was actually a short-term loan.
Basile sought certification of a class of individuals with similar claims. On January 17, 1996, the trial court entered an order that, for purposes of determining the class certification request, it would presume that Block was an agent of any person for whom it prepared a tax return. On May 30, 1997, the trial court, by relying on the January 17, 1996 presumption order, granted class certification on the issue of breach of fiduciary duty only. Block did not seek to file an immediate interlocutory appeal at this time.*fn1 Instead, Block and the newly certified class (Appellees) filed cross motions for summary judgment. On December 31, 1997, the trial court granted Block's motion for summary judgment and denied Appellees' motion for summary judgment. The trial court held that Block did not have an agency or confidential relationship with Appellees and, therefore, there was no breach of fiduciary duty.
Appellees filed an appeal, claiming the trial court should have granted their motion for summary judgment because Block owed them a fiduciary duty based on an agency and/or confidential relationship. On February 13, 1998, Block filed cross-appeals, challenging the trial court's January 17, 1996 presumption order and the May 30, 1997 class certification order.
On appeal, the Superior Court held Block's cross-appeal challenge to the January 17, 1996 presumption order was waived for failure to preserve its objection to this presumption order in the trial court. Basile v. H & R Block, Inc., 729 A.2d 574, 587 (Pa. Super. 1999). The Superior Court also held that an agency relationship existed between Block and Appellees. Id. The Superior Court did not discuss whether a confidential relationship existed. Id. Based on the existence of an agency relationship, the Superior Court reversed the grant of summary judgment and remanded the case to the trial court. Id. at 588.
Block filed a petition for allowance of appeal to this Court, seeking to challenge the Superior Court's determination that an agency relationship existed. This Court granted review and held that the Superior Court erred in holding that an agency relationship existed. This Court remanded the case to the Superior Court to address whether a confidential relationship existed. Basile v. H & R Block, Inc., 761 A.2d 1115 (Pa. 2000). On remand, the Superior Court held that the record established a prima facie case that a confidential relationship existed between Block and Appellees, and remanded the case back to the trial court. Basile v. H & R Block, Inc., 777 A.2d 95 (Pa. Super. 2001). In the trial court, Block filed a motion for decertification of the class, which was granted on December 20, 2003. The trial court ruled that individualized evidence was necessary to prove breach of a fiduciary duty based on a confidential relationship and, therefore, the case could not be tried as a class action.
Appellees filed an appeal from the decertification order and on March 1, 2006, an en banc panel of the Superior Court reversed the decertification. Basile v. H & R Block, Inc., 894 A.2d 786 (Pa. Super. 2006). The Superior Court held that Block had waived its right to challenge the class certification because it did not do so during the first appeal to the Superior Court in 1998. Id. at 790. Block again filed a petition for allowance of appeal to this Court. On September 26, 2006, by per curiam order, this Court granted allowance of appeal, vacated the Superior Court's order, and remanded the case to the Superior Court with specific instructions to address Pennsylvania Rules of Appellate Procedure 501 and 511, and related case law.*fn2
On remand, the en banc Superior Court again did not reach the merits of the trial court's decision regarding class certification but instead held only that Block had waived its challenge to class certification. Basile v. H & R Block, Inc., 926 A.2d 493, 500 (Pa. Super. 2007). This Court granted allowance of appeal on March 25, 2008 to determine whether the Superior Court misapplied the aggrieved party doctrine by requiring Block to appeal from an earlier class certification order even though summary judgment was entered in Block's favor.
The Superior Court's holding that Block waived its right to challenge the class certification is not only contrary to the law of Pennsylvania, but also undermined by the record. A thorough review of the extensive fifteen-year record in this case reveals that Block did indeed file Notices of Cross-Appeal from the January 17, 1996 presumption order and, more importantly, from the May 30, 1997 class certification order. In addition, Block briefed those two issues in the Superior Court and requested, "that the Court reverse Judge Avellino's January 17, 1996 Order, as well as the class certification order issued May 30, 1997." Block's August 28, 1998 Brief at 45. Block's two cross-appeals apparently were given separate docket numbers, both of which appeared in the caption of the Superior Court's 1999 opinion. Basile, 729 A.2d at 574. But the Superior Court addressed only the cross-appeal from the January 17, 1996 presumption order and, as previously stated, held that the presumption issue was waived. Id. at 587. The Superior Court did not address Block's cross-appeal of the May 30, 1997 class certification order at all. Id.*fn3
In addition, the Superior Court incorrectly applied Pennsylvania law by holding that Block was required to file a cross-appeal on the class certification issue. Pennsylvania Rule of Appellate Procedure 501 permits any "aggrieved party" to file an appeal. Pennsylvania case law also recognizes that a party adversely affected by earlier rulings in a case is not required to file a protective cross-appeal if that same party ultimately wins a judgment in its favor; the winner is not an "aggrieved party." See Hospital & Healthsystem Ass'n of Pa. v. Dept. of Public Welfare, 888 A.2d 601 (Pa. 2005) (holding that DPW was not an aggrieved party, as the prevailing party, and it did not need to file a cross-appeal).*fn4 Our holding is further supported by the Note to Pennsylvania Rule of Appellate Procedure 511 which states, "An appellee should not be required to file a cross appeal because the Court below ruled against it on an issue, as long as the judgment granted Appellee the relief it sought." Pa.R.A.P. 511, Note.*fn5 Here, Block was the ultimate prevailing party at the time of the 1998 appeal because it won its motion for summary judgment on the merits of the class action. As the prevailing party, it was not required to file a protective cross-appeal on the issue of class certification, although it did.*fn6
We also consider the Superior Court's interpretation of Pennsylvania Rule of Civil Procedure 1710(d).*fn7 See Basile, 926 A.2d at 501. Pursuant to Rule 1710(d), a class action can be decertified at anytime "before a decision on the merits." Pa.R.C.P. 1710(d). The Superior Court interpreted "before a decision on the merits" in Rule 1710(d) to mean that Block was required to challenge the class certification prior to the trial court's ruling on the motion for summary judgment on the issue of breach of fiduciary duty.*fn8 Basile, 926 A.2d at 501. While this interpretation is generally correct, it does not apply here where the Superior Court had earlier reversed the grant of summary judgment and remanded the matter to the trial court for further proceedings. Basile, 729 A.2d at 588. Once that happened, there was no "decision on the merits" and the trial court was permitted to revoke the class certification upon Block's motion. See Pa.R.C.P. 1710(d); Debbs v. Chrysler Corp., 810 A.2d 137 (Pa. Super. 2002) (holding that the class could be decertified three years after class certification when the jury verdict in favor of the plaintiffs was reversed on appeal because there was, at that point, no decision on the merits).*fn9
In addition, and most importantly, the order granting class certification in this case was based on the presumption that an agency relationship existed between the parties. This Court ultimately held that an agency relationship did not exist. Basile, 761 A.2d at 1121. Then the Superior Court held that a confidential relationship existed instead, thereby changing the legal context within which the trial court had made the initial class certification decision. Basile, 777 A.2d at 103. At that point, Block was free to file its motion for decertification because no decision on the merits existed.
Here, Block may have lost its preliminary challenge to Appellees' motion for class certification, but it ultimately prevailed on its motion for summary judgment on the merits. We hold that the Superior Court incorrectly held that Block waived its right to challenge the class certification because it did not seek immediate interlocutory review or file a cross-appeal. First, as stated previously, Block did indeed file a cross-appeal in the Appellees' 1998 appeal from the summary judgment in its favor. In addition, as the prevailing party, Block was not required to file a protective appeal for every interlocutory adverse order entered prior to summary judgment in order to protect against the possibility that the Superior Court might reverse the summary judgment entered in its favor. Therefore, Block did not waive its challenge to class certification. Moreover, under Rule 1710(d), the trial court was authorized to consider Block's motion for decertification after summary judgment was reversed. Accordingly, we reverse the order of the Superior Court and remand to the Superior Court for a determination on the merits of the trial court's decision decertifying the class.
Order reversed. Jurisdiction relinquished.
Madame Justice Todd and Mr. Justice McCaffery did not participate in the consideration or decision of this case.
Mr. Chief Justice Castille and Mr. Justice Eakin join the opinion. Mr. Justice Saylor files a concurring opinion.
Mr. Justice Baer files a concurring opinion.
MR. JUSTICE SAYLOR
Appellants suggest, and their amicus strongly advocates, that a prevailing party should not be permitted to file a cross-appeal due to the lack of aggrievement. See Brief for Appellants at 26 n.11; Brief for Amicus the Pennsylvania Defense Institute at 4-16; accord G. RONALD DARLINGTON, KEVIN J. MCKEON, DANIEL R. SCHUCKERS & KRISTEN W. BROWN, PENNSYLVANIA APPELLATE PRACTICE §511.4 (2d ed. Supp. 2004).*fn10 A contrary position has emerged in the federal courts, in that several circuit courts of appeals have permitted prevailing parties to file protective, conditional cross-appeals "to insure that any errors against [the cross-appellant's] interests are reviewed so that if the main appeal results in modification of the judgment his grievances will be determined as well." Trust for the Certificate Holders of the Merrill Lynch Mortgage Investors, Inc. v. Love Funding Corp., 496 F.3d 171, 173 (2d Cir. 2007) (quoting Hartman v. Duffey, 19 F.3d 1459, 1465 (D.C. Cir. 1994)).*fn11 Appellants observe that the current status of Pennsylvania law is uncertain on this point. See Brief for Appellants at 26 n.11.*fn12
In light of the manner in which the present case has been framed for our review, and since the majority does not specifically address the viability of a conditional cross- appeal in Pennsylvania, I reserve my own final conclusions on the matter for a future case. Here, I express only my present inclination toward the position that such cross-appeals generally should not be permitted. It seems to me that, on balance, the collective burden of screening and addressing such cross-appeals may outweigh the benefits from the opportunity for an appellate court to advance the resolution of the litigation in individual cases.*fn13
The parties also discuss the question of whether, where conditional cross-appeals are filed, the cross-appellants must raise all challenges they may wish to pursue with regard to any previous orders of the trial court on pain of waiver. The aggrievement inquiry is obviously a threshold consideration to this question, and therefore, and in light of the majority's disposition, I also decline to address this issue here. I note only that this waiver question appears to remain an open one, at least in the abstract. Thus, it is presently a relevant consideration for practitioners evaluating the option of a cross-appeal.
On the subject of the majority's treatment of Civil Procedural Rule 1710(d), I agree that Appellants' actual filing of a specific cross-appeal relative to the class-certification matter substantially undermines Appellees' arguments.*fn14 I have a modest difference, however, with the majority's subsequent analysis, which appears to hinge on the proposition that the fact of a previous decision on the merits ceases to exist upon its vacatur on appeal. See Majority Opinion, slip op. at 7. While this is certainly one way of conceptualizing the rule's application, I prefer the federal courts' approach of recognizing the ambiguity of the "decision on the merits" rubric, see Fed.R.Civ.P. 23, Advisory Committee Notes to the 2003 Amendments, and replacing it with language reflecting that the class certification decision is open to alteration or amendment pending a final decision on the merits.*fn15 Accord Fed.R.Civ.P. 23(c)(1)(C). See generally 6A FED. PROC. L.ED. §12:293 (2008) ("District courts are required to reassess their class rulings as the case develops and to take cognizance of changed factual situations, and any certification determination may be modified, expanded, subdivided, or vacated in light of subsequent developments in the litigation.").*fn16
In the present case, regardless of whether a separate notice of appeal was lodged relative to the class certification order, the majority decision of this Court determining that no agency relationship existed between Appellants and Appellees undermined the basis on which class treatment had been permitted. In my view, this fundamental alteration in the prevailing circumstances justified the filing and consideration of a subsequent decertification motion in the common pleas court, with or without a specific cross-appeal to the class-certification order.*fn17 Cf. Majority Opinion, slip op. at 7.
I join the Majority Opinion, reversing the Superior Court, based upon the Majority's conclusion that H&R Block did not waive its challenge to class certification and that the trial court had the authority to decertify the class following the Superior Court's eventual decision reversing summary judgment. Although I agree with the Majority that protective cross-appeals are not required, I write separately to second Justice Saylor's inclinations to deem protective cross-appeals impermissible. Dissenting Slip Op, at 3 (Saylor, J.). However, unlike Justice Saylor, I believe the Court should make that determination in this case. Given that the Superior Court premised its holding on H&R Block's alleged failure to file a protective cross-appeal, the issue of protective cross-appeals is squarely before us, allowing us to consider the validity, as well as necessity, of such appeals for the bench and bar according to our rules of appellate procedure.
Based on Pa.R.A.P. 501, I conclude that a non-aggrieved party should not be permitted, let alone required, to file a protective cross-appeal. Chapter Five of our appellate rules is entitled "Persons who may take or participate in appeals" and Rule 501 provides that an aggrieved party may appeal. Pa.R.A.P. 501.*fn18 The rules do not mention any other method of having standing to take an appeal. Indeed, nothing in Rule 511 providing for cross-appeals suggests that a non-aggrieved party can appeal.*fn19 This conclusion is also supported by our longstanding respect for the aggrieved party doctrine in other contexts: "[W]here a person is not adversely affected in any way by the matter challenged, he is not aggrieved and thus has no standing to obtain a judicial resolution of that challenge." Hospital and Healthsystem Ass'n of Pa. v. Dept. of Public Welfare, 888 A.2d 601, 607 (Pa. 2005); see also Wm. Penn Parking Garage, Inc. v. City of Pittsburgh, 346 A.2d 269, 280 - 281 (Pa. 1975) (plurality).
Moreover, refusing to hear protective cross-appeals will streamline cases on appeal and prevent prevailing parties from deluging the courts with unnecessary protective cross-appeals. Additionally, the prohibition of protective cross-appeals eliminates the question of whether a non-aggrieved party filing a protective cross-appeal must raise every potential appealable issue for fear of waiver. I note, in closing, that to the extent permissive cross-appeals would deluge our courts, requiring every potential issue to be raised by a non-aggrieved party in a protective cross-appeal, on pain of waiver, would turn such deluge into a full-fledged tsunami.