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Class Action Defense Cases-Wernikoff v. Health Care Service: Illinois Appellate Court Reverses Order Decertifying Class Action But Affirms Summary Judgment As To Plaintiff’s Claims Thus Requiring Appointment Of New Class Representative

In Class Action Lawsuit Alleging Fraud, Trial Court Abused its Discretion in Decertifying Class Action because Subsequent Discovery did not Amount to “Changed Circumstances” Necessary to Support Decertification of Class Action, but Summary Judgment in Favor of Defense Properly Granted because Class Action Representative could not Establish Reliance thus Requiring Appointment of New Class Representative Illinois Appellate Court Holds

Plaintiff filed a class action lawsuit against her insurer, Health Care Service Corporation (dba BlueCross BlueShield of Illinois), alleging common law fraud and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act arising out of the company’s allegedly fraudulent business practices in the setting and revising of its policyholders’ premium rates. Wernikoff v. Health Care Serv. Corp., 877 N.E.2d 11, 13-14 (Ill.App. 2007). Specifically, the class action complaint alleged that defendant “failed to disclose to policyholders the option of reapplying as a new policyholder and, if approved, paying the new business rate premium.” Id., at 14. Plaintiff filed a class action certification motion in 2003, which the trial court granted, id., at 13. In 2006, after the case had been reassigned to a new judge, defense attorneys moved to decertify the class action and for summary judgment; the trial court granted both motions. Id., at 14. The appellate court reversed the order decertifying the class action, but affirmed the order granting summary judgment.

Addressing the order decertifying the class action, the appellate court explained that “an order setting aside an earlier determination of class certification would be proper if clearly changed circumstances or more complete discovery warranted it, rather than mere feelings of error regarding the original certification order.” Wernikoff, at 14 (citing Barliant v. Follett Corp., 74 Ill.2d 226, 231 (Ill. 1978)). An order decertifying a class action is reviewed for abuse of discretion. Id., at 14-15 (citation omitted). Plaintiff argued that the trial court abused its discretion because there were no “changed circumstances” and because the additional discovery did not warrant decertification; defense attorneys countered that more than 24 additional depositions had been taken and that the circumstances had changed. Id., at 15. “Specifically, defendant points to plaintiff’s second deposition, which occurred after the class was certified, in which plaintiff admitted that he knew about the option to reapply to receive the new business rate but chose not to do so for several years. Defendant also points to the fact that the depositions of many policyholders revealed that not all policyholders relied on the ‘standard written materials’ but relied on the statements made in oral communications with defendant’s customer service representatives.” Id.

The appellate court concluded that “although more discovery occurred after the initial class certification, that discovery did not amount to changed circumstances warranting decertification.” Wernikoff, at 15. In essence, the facts relied upon by defense attorneys may have been “new,” but “they did not amount to any significant difference or change.” Id. Accordingly, the court held that the trial court abused its discretion in decertifying the lawsuit as a class action, id.

However, the appellate court also concluded that summary judgment in favor of the defense was proper because “because plaintiff cannot establish a cause of action for either consumer fraud or common law fraud.” Wernikoff, at 17. As noted above, plaintiff’s deposition testimony revealed that he could not establish reliance on any representations by the defendant, which is a necessary element of both the statutory and common law fraud claims alleged in the class action complaint. Id. Accordingly, the appellate court remanded the class action to the trial court with directions that the circuit court “appoint a new class representative,” id.

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