The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge
ORDER GRANTING PLAINTIFFS' MOTION FOR CERTIFICATION OF CLASS ACTION [Doc. No. 47]
Currently before the Court is Plaintiffs Leroy Grayson and Alvin McKenzie's Motion for Certification of Class Action. [Doc. No. 47.] Plaintiffs seek certification from the Court that this action is maintainable as a class action under Rule 23(b)(3) of the Federal Rules of Civil Procedure. Plaintiffs also request certification as the representatives of the plaintiff class and their counsel, as counsel for the plaintiff class. Defendant 7-Eleven, Inc., does not oppose the motion. For the following reasons, the Court GRANTS Plaintiffs' motion.
This purported class action was brought by two former 7-Eleven store franchisees, on behalf of a statewide class of former 7-Eleven franchisees, against their former franchisor, 7-Eleven, Inc., seeking to recover federal excise tax refunds that 7-Eleven collected from the U.S. Treasury since late 2008.
According to Plaintiffs, starting in approximately July 2000, the federal government collected excise taxes on all pre-paid long distance telephone cards sold to the general public. Franchisees operating 7-Eleven stores sold pre-paid long distance telephone cards and the full cost was built into the "cost of goods." Once the franchisees sold the cards, the franchisor/franchisee split the profit margin according to their Franchise Agreement. The excise tax cut into the profit margin because the franchisor and franchisee would have made a greater profit on the calling cards if the excise tax was not built into their cost. As a result, the franchisees' share of the tax was essentially split with 7-Eleven based on the profit margin.
In July 2006, the federal government stopped collecting the excise tax and thereafter the U.S. Treasury authorized a refund of the excise taxes collected from July 2000 through July 2006. When the federal government began issuing refunds, 7-Eleven collected the refunds for all current and former franchisees. 7-Eleven issued credits for the excise tax refund to all current franchisees, but did not return the refund to store owners who paid the excise tax but terminated their franchises prior to September 2007.
Plaintiff Grayson owned his 7-Eleven franchise between 1987 and November 2004. Plaintiff McKenzie was a franchisee owner from May 1992 until September 1, 2005. Both were subject to the federal government's excise tax and paid their share of the tax levied against pre-paid long distance phone cards from July 2000 until they terminated their franchise agreements with 7-Eleven. Based on 7-Eleven's accounting records, Plaintiffs allege Grayson is owed approximately $23,600 and McKenzie is owed $16,600. Plaintiffs believe there are over 1,300 nationwide former franchisees that are potentially eligible for the federal excise tax refund, of which 293 are based in California.
Plaintiffs brought this action against Defendant on June 23, 2009 [Doc. No. 1] and Plaintiffs filed the operative First Amended Complaint ("FAC") on August 10, 2009. [Doc. No. 10.] The FAC asserts three causes of action: (1) conversion; (2) common counts -- money had and received; and (3) breach of implied contract. [Id.] Defendant filed an answer on August 28, 2009.
[Doc. No. 12.] On July 21, 2010, the parties submitted a joint motion stipulating to class certification of a nationwide class under Federal Rule of Civil Procedure 23 [Doc. No. 24], which the Court granted. [Doc. No. 25.] Subsequently, the parties filed cross-motions for summary judgment. [Doc. Nos 31, 32.] Upon review of the parties' summary judgment pleadings, the Court concluded that decertification of the nationwide class was necessary and vacated its prior order without prejudice to Plaintiffs renewing the motion for certification of a redefined class. [Doc. No. 42.] In response, Plaintiffs filed the pending motion for class certification pursuant to Federal Rule of Civil Procedure 23. [Doc. No. 47.] Defendant does not oppose the motion.
The party seeking certification bears the burden of showing that each of the four requirements of Rule 23(a) and at least one requirement of Rule 23(b) have been met. Ellis v. Costco Wholesale Corp., 657 F.3d 970, 979-980 (9th Cir. 2011). Rule 23(a) requires parties seeking class certification to establish: (1) that the class is so large that joinder of all members is impracticable (numerosity); (2) that there are one or more questions of law or fact common to the class (commonality); (3) that the named parties' claims are typical of the class (typicality); and (4) that the class representatives will fairly and adequately protect the interests of other members of the class (adequacy of representation). FED. R. CIV. P. 23(a).
The United States Supreme Court requires district courts to engage in a "rigorous analysis" of each Rule 23(a) factor when determining whether plaintiffs seeking class certification have met the requirements of Rule 23. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551, 180 L. Ed. 2d 374 (2011). In many cases, "that 'rigorous analysis' will entail ...