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Class Actions Under the Montana Consumer Protection Act

The Montana Consumer Protection Act is a strong remedy for consumers who are the victims of unfair or deceptive business conduct.  It has been applied broadly to encompass misconConsumer Protectionduct by banks, debt collectors, car dealers, and mobile home manufacturers among others.  The Act provides for statutory treble damages and attorney’s fees.  But, the Act explicitly prohibits consumers from bringing class actions.[1]  This prohibition has insulated businesses who engage in patterns of fraudulent or deceptive as each consumer has been forced to bring his or her own individual claim.  The prohibition against class actions is also in direct contrast to the clear language of Federal and Montana Rule 23 which specifically authorize class actions for judicial economy.  In the federal court system, the question becomes whether the federal rule trumps the state statute.

In the case of Wittman v. CB1, Inc.[2], the plaintiffs filed a putative class action against a debt collector for assessing a 2.5% surcharge against debtors who pay with credit or debit cards.  Plaintiffs assert that this assessment violates the Fair Debt Collection Practices Act and also the Montana Consumer Protection Act.

The defendant moved to dismiss Wittman’s Consumer Protection Act claim on the basis of the prohibition against class actions codified in the Montana statute.  Magistrate Judge Carolyn Ostby, in an April 2016 Findings and Recommendations, recommended that the debt collector’s motion to dismiss be denied and the claim allowed to proceed.  On June 2, 2016, Judge Brian Morris adopted the recommendations and denied the motion to dismiss, thus allowing the putative class action under the Consumer Protection Act to proceed.  Judge Morris held:

Montana’s consumer protection statutes explicitly prohibit class-action treatment under the statute.  Federal Rule Civil Procedure 23, by contrast, provides the procedure used in federal courts to determine whether a plaintiff may bring a certain action as a class action.  Rule 23 appears to conflict with Montana’s consumer protection statute prohibiting class actions.

The Supreme Court addressed the conflict between Rule 23 and a state statute prohibiting class action suits in Shady Grove Orthopedic Associates, PA v. Allstate Ins. Co., 559 U.S. 393 (2010).  The Supreme Court determined that Rule 23 preempted a New York state law that prohibited class actions in cases that seek penalties or statutory minimum damages.  …

The Court will look only to the part of Justice Scalia’s opinion to which five Justices joined, and the pre-Shady Grove approach in the Ninth Circuit, to determine whether application of the federal rule violates the Rules Enabling Act.  Application of Rule 23 affects only the process of enforcing the litigants’ rights.  The same MCPA provision that prohibits class actions also provides for minimum statutory damages.  The prohibition alters only the procedural means by which that remedy may be pursued.  The class action prohibition itself does not add, subtract, or define any of the necessary elements of the claim.  Each individual plaintiff could proceed with a suit under the MCPA and receive the same remedy regardless of whether the plaintiff brought suit individually or as part of a class action. 

“Rule 23 permits all class actions that meet its requirements.”  Shady Grove.  A state cannot limit this permission to proceed with a class action in federal court “by structuring one party of its statute to track Rule 23 and enacting another part that imposes additional requirements.”

For these reasons, the Court agrees with the Magistrate Judge’s determination that the MCPA class action prohibition remains procedural in nature and that Rule 23 applies to determine whether a claim may be brought as a class action.

With this ruling, it is now settled that a consumer has a right to pursue a class action under the Montana Consumer Protection Act in federal court.  Judge Ostby and Judge Morris properly determined that Federal Rule 23 trumps the prohibition.  This is an excellent result for consumers as it allows them to properly invoke Rule 23 and have unfair and deceptive business conduct prosecuted on a class action basis in federal court.

 

[1] MCA § 30-14-133(1).

[2] Cause No. CV 15-105-BLG-BMM (D. Mont.)