Murphy v. Gospel for ASIA, Inc

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

GARLAND D. MURPHY, Ill, M.D., and

PHYLLIS MURPHY, Individually and on

behalf of all others similarly situated PLAINTIFFS

CASE NO. 5:17-CV-5035

GOSPEL FOR ASIA, INC.; GOSPEL FOR ASIA-INTERNATIONAL;

K.P. YOHANNAN; GISELA PUNNOSE; DANIEL PUNNOSE;

DAVID CARROLL; and PAT EMERICK DEFENDANTS

MEMORANDUM OPINION AND ORDER

Currently before the Court is Plaintiffs’ Motion to Certify Class Action (Doc. 48),

along with Defendants’ Response (Doc. 70), Plaintiffs’ Reply (Doc. 88), and additional

briefing.’ Although the motion was initially set for oral argument on June 15, 2018, the

parties notified the Court that they wished to forego a hearing and submit the motion on

the briefs. Having considered the Motion and the Objections, which are now ripe for

decision, the Court GRANTS IN PART AND DENIES IN PART the Motion to Certify Class

(Doc. 48). For the reasons explained below, the Court will certify the proposed nationwide

class (as modified) for the Civil RICO claim and will certify the proposed Arkansas

1 The pending Motion to Certify Class Action has been extensively briefed. In support of

Plaintiffs’ initial Motion, the Court received a Memorandum Brief in Support (Docs. 49,

50), Declaration (Doc. 51), and a Statement of Facts (Docs. 52, 53). Beyond Defendants’

Response in Opposition, the Court has also received Objections (Doc. 72), Appendices

(Docs. 74-80), and a Notice of Supplemental Authorities (Doc. 113). Reference herein to

multiple versions of the same filing is made because the parties have submitted much of

the material under seal. Thus, the references are to the unredacted and public versions

of the filings.

subclass for the Arkansas Deceptive Trade Practices Act (“‘ADTPA’), fraud, and unjust

enrichment claims.

|. BACKGROUND

The Court has previously given an exhaustive recounting of the facts of this case

in its prior Orders (Docs. 44, 60, 63, 67, 119, and 125) and during several hearings that

have been held to resolve a months-long discovery dispute (Docs. 26, 37, and 65). Thus,

it repeats here only those facts necessary to establish context for the Court’s ruling.

GFA is a Christian missionary organization operating in South Asia, mainly in India.

To fulfill its charitable purposes, GFA solicits donations from donors across the world.

Each year, according to the Complaint, over one million unique donations are made to

GFA from tens of thousands of donors in the United States alone. (Doc. 1, § 15). GFA

then works with its overseas agents and international field partners (many of which are

entities closely affiliated with and/or controlled by the named Defendants) to ensure that

the designated money reaches its intended purposes in Asia (“the field”). To maintain its

ability to send sufficient funds to the field, GFA arranges fundraising pitches in several

mediums, including in-person solicitations at churches in the United States, on its own

website, and through advertising efforts on social media and in various mailings and radio

broadcasts.

2 As the Court explained in the Order on the Motion to Stage Alter Ego Issues after Verdict

(Doc. 60), there are at least 76 different entities that are alleged to be field partners or

alter egos of the named Defendants. Although GFA’s discovery conduct (the subject of

the Order following this one) has severely undermined the Plaintiffs’ ability to establish

the money trail from initial donation to end user, the allegations in the Complaint (Doc. 1)

are that this money is ultimately transmitted to the field with the help of these field partners

and then to end users, many of whom are pastors in local churches, for ultimate use on

the designated field purposes.

Because the needs of the poor in Asia are so many, GFA allows potential donors

to specify for what purpose(s) their field donations will be spent. For instance, donors who

give online or in response to catalogues may direct their donations to any of 179 different

donation categories, including everything from “Jesus wells” to water buffaloes. Donors

make these designations by either checking boxes on order forms or, if ordering online,

by adding the item (which lists the corresponding price) to their shopping cart.? At other

times, GFA directly solicits donations for particular items, including “emergency grams”

sent in the wake of natural disasters soliciting donations for items related to disaster relief

and advertisements sent around the holidays asking for donations for blankets because

“the weather outside is frightful, but this blanket is so delightful.” (Doc. 1, pp. 9, 11)

(cleaned up).

Plaintiffs allege that throughout the proposed class period, whether the

advertisements were made by GFA representatives at in-person church presentations,

through catalogue mailings, on GFA’s website, or in GFA’s radio presentations, GFA

included a similar promise to its donors that 100% of the money given by donors would

be sent to the field and ultimately spent in accordance with the donor’s wishes rather than

a Camels

$345 each

Camets feel right at home in Raissthen, one of the

hottest and Greet places in india. They can work

jong hours in the heal with no problem and are

used for plowing, transportation and hauling

goods. Trucks Quickly sink into sand, However

Carnels Can Carty up to 330 pounds across 8

desert with no problem. Came! milk is alse part of

mary dete in Rajastern, and camel woo! can

even be woven into cloth

ly Donation 5

(Doc. 1, p. 12).

being applied to cover administrative costs or overhead. In fact, even beyond the alleged

promises made in these solicitations, potential donors or casual scrollers who stumbled

upon GFA’s website could learn in the FAQ section not only that 100% of what you give

for chickens goes for chickens but aiso how GFA could ensure that the donated money

designated for the field ultimately went there. (Doc. 53-5, pp. 3, 4). Moreover, Defendants

acknowledge that every GFA donor received receipts that contained a representation that

“[o]ne hundred-percent of all contributions designated for use on the mission field are sent

to the mission field.” (Beers Decl., Doc. 77-1, pp. 9, 10).

This lawsuit centers on Plaintiffs’ claims that, despite these numerous

representations, GFA did not, in fact, spend the donated—and designated—money in

accordance with the donors’ wishes or with GFA’s representations. All told throughout the

proposed class period, the parties agree that approximately $375 million in donations are

at issue.4 As a result, Plaintiffs have asserted a number of causes of action against GFA,

including Civil RICO, fraud, unjust enrichment, and an Arkansas-specific claim under the

ADTPA. For the Civil RICO, fraud, and unjust enrichment causes of action, Plaintiffs now

seek to certify a nationwide class as follows:

All persons in the United States who donated money to GFA from January

1, 2009 through the date the Class is certified for Project Codes 1000-4900.

Excluded from the Class are unknown donors; Defendants and their

subsidiaries and affiliates; all persons who make a timely election to be

excluded from the Class; governmental entities; and the Judge to whom this

case is assigned and his/her immediate family.

4 See, e.g., Doc. 65, pp. 41-42 (Mr. Mowrey, Lead Defense Counsel, commenting that “if

you look at the specific designations over the relevant time period, it’s about $375 million.

| mean, and | don’t think there will be any dispute about that. That’s the number, if you

look at the designations that are in dispute. It’s about $375 million over this time period.”).

(Doc. 49, p. 20). The proposed ADTPA subclass is identical, except that “Arkansas” is

substituted for “the United States.” They also request that the Court designate Dr. Garland

Murphy and Phyllis Murphy as Class Representatives and approve the Stanley Law

Group as Lead Class Counsel and the Bassett Law Firm as Class Counsel.

Il. LEGAL STANDARD

The party seeking class certification bears the burden of proving that Rule 23’s

requirements are satisfied. See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011).

The district court retains “broad discretion in determining whether to certify a class,

recognizing the essentially factual basis of the certification inquiry and . . . the district

court’s inherent power to manage and control pending litigation.” /n re Zurn Pex Plumbing

Prods. Liab. Litig., 644 F.3d 604, 616 (8th Cir. 2011) (internal quotations and citations

omitted). Nevertheless, a district court must undertake “a rigorous analysis” to ensure

that the requirements of Rule 23 are met. Gen. Tel. Co. of the Sw. v. Falcon, 467 U.S.

147, 161 (1982). “Frequently that ‘rigorous analysis’ will entail some overlap with the

merits of the plaintiff's underlying claim.” Dukes, 564 U.S. at 351. The district court may

“resolve disputes going to the factual setting of the case” if necessary to the class

certification analysis. Blades v. Monsanto Co., 400 F.3d 562, 567 (8th Cir. 2005).

In performing this rigorous analysis, “[a] court is not bound by the proposed

definitions of the class, Smith v. Brown & Williamson Tobacco Corp., 174 F.R.D. 90, 92

n.2 (W.D. Mo. 1997) (citation omitted), and “has the authority to redefine a proposed class

in such a way-as to allow the class action to be maintained.” In re Zurn Pex Plumbing

Prods. Liability Litig., 267 F.R.D. 549, 558 (D. Minn. 2010); see also Davoll v. Webb, 194

F.3d 1116, 1146 (10th Cir. 1999) (courts have “broad discretion” to “modify the definition”

of the class); In re Monumental Life Ins. Co., 365 F.3d 408, 414 (5th Cir. 2004) (“[H]olding

plaintiffs to the plain language of their definition would ignore the ongoing refinement and

give-and-take inherent in class action, particularly in the formation of a workable class

definition.”). The Court’s discretion to redefine the proposed class extends to the ability

to create partial class actions as to particular issues and subclasses. See, e.g., Newberg

on Class Actions § 7:30 (5th ed. 2018); Charles A. Wright and Arthur R. Miller, 7AA

Federal Practice & Procedure §1790 (3d ed. 2018). But, any such subclass must still meet

the requirements for class certification under Rule 23. Paxton v. Union Nat'l Bank, 688

F.2d 552, 559 (8th Cir. 1982).

An implicit requirement for any class certification inquiry involves a court's

assessment as to the ascertainability of the class. The description of a proposed class

must be sufficiently definite to permit class members to be identified by objective criteria.

See Sandusky Wellness Cir., LLC v. Medtox Sci., Inc., 821 F.3d 992, 996-97 (8th Cir.

2016). “The requirement that a class be clearly defined is designed primarily to help the

trial court manage the class. It is not designed to be a particularly stringent test, but

plaintiffs must at least be able to establish that the general outlines of the membership of

the class are determinable at the outset of the litigation.” Bynum v. Dist. of Columbia,

214 F.R.D. 27, 31 (D.D.C. 2003).

Under Rule 23, certifying a class action requires a two-step analysis. First, the

Court must determine whether:

* the class is so numerous that joinder of all members is impracticable

(“numerosity’);

* there are questions of law or fact common to the class (“commonality’);

* the claims or defenses of the representative parties are typical of the claims or

defenses of the class (“typicality’); and

* the representative parties will fairly and adequately protect the interests of the

class (“fair and adequate representation’).

Rule 23(a)(1)-(4). Second, because Plaintiffs seek to maintain the classes under Rule

23(b)(3), the Court must determine whether:

* questions of law or fact common to class members predominate over questions

affecting only individual members (“predominance”); and

* a class action is superior to other available methods for fairly and efficiently

adjudicating the controversy (“superiority”).

Rule 23(b)(3).

lll. DISCUSSION

Because the class and any subclass must independently meet the requirements

of Rule 23, the Court considers separately whether the proposed nationwide class and

Arkansas subclass satisfy the requirements of Rule 23.

A. Nationwide Class

1. Numerosity (Rule 23(a)(1)) and Ascertainability

The Court begins by assessing whether the class is so numerous that joinder of

all members is impracticable, and, relatedly, whether the members of the class are readily

ascertainable. The Eighth Circuit, “unlike most other courts of appeals, has not outlined

a... separate, preliminary requirement” of ascertainability that would require plaintiffs to

demonstrate a method of identifying class members that is administratively feasible. See

Sandusky Wellness, 821 F.3d at 996. Rather, the Eighth Circuit simply adheres to a

rigorous analysis of the Rule 23 factors, and while it recognizes that this analysis

necessarily entails that a class be “adequately defined and clearly ascertainable,” the

focus of this threshold inquiry is on whether the proposed class definition identifies class

members by objective criteria, rather than on the administrative concerns that are already

taken into account by the Rule 23(b)(3) factors of predominance and superiority. See id.

GFA does not seriously dispute that the proposed nationwide class is readily

ascertainable and so numerous that joinder of all members would be impracticable. After

all, by GFA’s own count, the proposed nationwide class would consist of 185,414

individual members. (Doc. 80-4, p. 3). Clearly, the class is ascertainable by objective

criteria. Additionally, given the size of the putative nationwide class, the numerosity

requirement is satisfied as well.

2. Commonality (Rule 23(a)(2))

Commonality does not require “that every question of law or fact be common to

every member of the class.” Paxton v. Union Nat'l Bank, 688 F.2d 552, 561 (8th Cir.

1982). In fact, commonality does not even require more than one common question. For,

as the Supreme Court noted in Dukes, “[e]ven a single [common] question will do.” 564

U.S. at 359 (alterations in original, internal quotation marks and citation omitted). To

establish commonality, the putative class members must have “suffered the same injury,”

and “[t]heir claims must depend upon a common contention.” /d. at 349-50. In other words,

the contention must “be of such a nature that it is capable of class-wide resolution—which

means that determination of its truth or falsity will resolve an issue that is central to the

validity of each of the claims in one stroke.” /d. at 350.

8 .

The putative class members in this case share many common questions of law

and fact. First, they all assert similar injuries based on the same allegedly fraudulent

conduct of the Defendants. In particular, the Court notes the following non-exhaustive list

of common questions:

1) What GFA promised throughout the class period;

2) Whether GFA acted in accordance with those promises;

3) Whether GFA committed a pattern of racketeering activities;

4) Whether a RICO enterprise exists; and

5) Whether the named Defendants participated in that enterprise.

The answers to these and other common questions of law and fact are central to

the asserted Civil RICO, fraud, and unjust enrichment claims and therefore are likely to

drive their resolution. Not surprisingly, courts have held that “the proposed class

representative's claims are generally held to be typical of the class members’ claims if the

allegations can be traced to the same overall fraud.” Robert v. C.R. England, Inc., 318

F.R.D. 457, 511 (D. Utah 2017) (quoting 1 William B. Rubenstein, Newberg on Class

Actions § 3:36 (5th ed. 2012)). Given the common contentions in this case, all of which

are shared by each class member and susceptible to proof on a class-wide basis, the

Court finds that the commonality requirement is satisfied.

3. Typicality (Rule 23(a)(3))

The typicality requirement is satisfied where the proposed class members’ claims

“are based on the same legal or remedial theory.” Paxton, 688 F.2d at 561-62. Thus,

courts find that the claims can be maintained as a class action and satisfy the typicality

requirement “despite factual variations among class members if the claims of the putative

representative and class members advance the same legal theories and challenge the

same pattern or practice, or alleged common course of fraudulent conduct.” 1 McLaughlin

on Class Actions § 4:24 (14th ed. 2017) (citing Just Film, Inc. v. Buono, 847 F.3d 1108,

1117 (9th Cir. 2017)).

The Court finds that the named Plaintiffs’ Civil RICO claims are typical of the Civil

RICO claims that would be advanced by the members of the proposed putative

nationwide class. All class members would be marshaling the same facts and advancing

the same legal theories to demonstrate the existence of an enterprise and the pattern of

racketeering activity necessary to trigger liability (i.e. the alleged common course of

fraudulent conduct and the predicate acts necessary to qualify as a pattern of conduct).®

Because the legal theories would all be premised on the same pattern or practice, the

Court finds that the typicality requirement has been satisfied with respect to this claim.

However, the Court cannot conclude that the typicality requirement has been

satisfied with respect to Plaintiffs’ fraud and unjust enrichment claims. Unlike with Civil

RICO, the elements of fraud and unjust enrichment, the standards of proof, and the

scienter requirements vary considerably from state to state. And because these are state

common law causes of action, this Court would be duty-bound to conduct a choice-of-law

analysis to determine which state(s) law would apply. As Defendants rightly note, that

analysis would begin with the forum state’s choice-of-law rules. Winter v. Novartis

As this Court has explained elsewhere, particularly in its Opinion denying Defendants’

Motion for Judgment on the Pleadings as to the Civil RICO claim (Doc. 119), the elements

of a Civil RICO cause of action are: “(1) conduct (2) of an enterprise (3) through a pattern

(4) of racketeering activity.” See, e.g., Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417, 428

(8th Cir. 2009) (citing Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)).

10

Pharms. Corp., 739 F.3d 405, 410 (8th Cir. 2014). The Arkansas Supreme Court indicated

in Ganey v. Kawasaki Motors Corp., USA, that Arkansas now relies both upon the doctrine

of lex loci delicti and the Leflar choice-influencing factors® in deciding which state’s

substantive law to apply. 366 Ark. 238, 251 (2006). The Court is convinced that the

application of this Arkansas choice-of-law analysis would lead to the conclusion that the

substantive law to be applied on these two causes of action would be the laws of the state

where each putative class member resided at the time (s)he received the allegedly

fraudulent representations by GFA. See, e.g., Jarrett v. Panasonic Corp. of N. Am., 8 F.

Supp. 3d 1074, 1087 (E.D. Ark. 2013).

Thus, if the fraud and unjust enrichment claims were maintained on a nationwide

basis, the Court would in effect be applying the laws of each state and territory where the

180,000 class members reside. It would be one matter if the laws on fraud and unjust

enrichment were not so variable across state lines. However, the Court’s own review of

variations in state laws on fraud and unjust enrichment, as reflected in the Defendants’

50-state summary of these differences (see Docs. 76-8, 76-9), leads it to conclude that

there are insurmountable problems with allowing the proposed nationwide class to be

certified with respect to the fraud and unjust enrichment claims.’ To take but one example,

6 The Leflar choice-influencing factors are: 1) predictability of results, 2) preservation of

interstate or international order, 3) simple application by the judiciary, 4) the forum’s

governmental interests, and 5) application of the better law.

7 Because of the potential that variations in state laws could swamp common issues and

destroy predominance, courts around the country have required the party seeking

certification to “provide an extensive analysis of state law variations to reveal whether

these pose insuperable obstacles.” Cole v. Gen. Motors Corp., 484 F.3d 717, 725 (5th

Cir. 2007) (internal quotation omitted). Plaintiffs have not provided such an analysis in an

effort to persuade the Court that variations in state law would not cause insurmountable

11

the proposed class representatives, the Murphys, Arkansas residents, would only need

to show fraud by a preponderance of the evidence and prove that they justifiably relied

on GFA’s representations. See Delanno, Inc. v. Peace, 237 S.W. 3d 81, 84 (Ark. 2006)

(requiring all five elements of fraud—including justifiable reliance—to be proven by a

preponderance of the evidence). However, the 842 putative class members in

Connecticut would be required to prove some of the elements of fraud by “clear, precise,

and unequivocal” evidence, but could show by a fair preponderance of the evidence that

they reasonably relied upon the representation(s) to their detriment. Parker v. Shaker

Real Estate, Inc., 705 A.2d 210, 213 (Conn. Ct. App. 1998). Many other examples could

be given. The overall conclusion, though, is that although these clear differences would

lead to considerable management nightmares, they also defeat Plaintiffs’ attempts to

show that their fraud and unjust enrichment claims are typical of the claims to be asserted

by the remaining members of the proposed class. See Lewis v. First Am. Title Ins. Co.,

265 F.R.D. 536, 556 (D. Idaho 2010) (citing Falcon, 457 U.S. at 158) (different legal

standards across five jurisdictions make plaintiff's claims atypical of claims of members

in other states); Duchardt v. Midland Nat. Life Ins. Co., 265 F.R.D. 436, 445-48 (S.D. lowa

2009) (finding that typicality was lacking because different legal standards would need to

be applied to prospective class claims).

However, although the fraud and unjust enrichment claims cannot be maintained

on a nationwide class basis, this does not simply mean that Plaintiffs have no options.

management problems. Indeed, Plaintiffs insist only that any management problems

caused by differences in the various state laws on these two causes of action could be

cured with a single set of jury instructions and alternate questions on the standard of

proof. See Doc. 88, p. 20. The Court remains unconvinced.

12

For, as the Court will explain below when assessing the Arkansas subclass, Plaintiffs can

maintain their claims of fraud and unjust enrichment as a class action on behalf of the

2,608 Arkansas class members asserting fraud and unjust enrichment under Arkansas

law. Doing so would eliminate the problems identified above regarding the typicality of the

Murphys’ fraud and unjust enrichment claims.

4. Adequacy of Representation (Rule 23(a)(4))

In many ways, the inquiry as to the adequacy of the class representation under

Rule 23(a)(4) is similar to the inquiry on typicality. The Court must ask “whether the

representative parties will fairly and adequately protect the interests of the class.” Fed. R.

Civ. P. 23(a)(4).

The Court finds that the Murphys will fairly and adequately represent the interests

of the classes. From the outset of this litigation, they have vigorously prosecuted their

own interests, including litigating for the past eleven months whether the named

Defendants have abused the discovery process by obfuscating whether they have

evidence in their possession that would show whether they failed to, despite their prior

representations, spend money in the field and in conformity with the alleged promises

they made to donors. There is no good reason to believe that this will change following

certification.

Additionally, as evidenced by the submissions in support of the class certification

motion, the Court finds that Lead Class Counsel and Class Counsel have the requisite

extensive experience and success prosecuting class action cases, and GFA does not

challenge or dispute these qualifications.

13

5. Requirements of Rule 23(b)(3)

In addition to finding that Rule 23(a) has been satisfied, the Court must also

consider whether one of three possible types of class actions, identified in Rule 23(b),

has been met prior to certifying a class action. Plaintiffs seek certification under Rule

23(b)(3). That rule requires the Court to determine whether “questions of law or fact

common to class members predominate over any questions affecting only individual

members” (“predominance”) and whether “a class action is superior to other available

methods for fairly and efficiently adjudicating the controversy” (“superiority’). The

following factors are pertinent:

(A) the class members’ interests in individually controlling the prosecution

or defense of separate actions;

(B) the extent and nature of any litigation concerning the controversy

already begun by or against class members;

(C) the desirability or undesirability of concentrating the litigation of the

claims in the particular forum; and

(D) the likely difficulties in managing a class action.

Fed. R. Civ. P. 23(b)(3)(A)-(D).

a. Predominance

“The Rule 23(b) predominance inquiry tests whether proposed classes are

sufficiently cohesive to warrant adjudication by representation.” Amchem Prods., Inc. v.

Windsor, 521 U.S. 591, 623 (1997). The Eighth Circuit has explained that:

When determining whether common questions predominate, a court must

conduct a limited preliminary inquiry, looking behind the pleadings, but that

inquiry should be limited to determining whether, if the plaintiffs’ general

allegations are true, common evidence could suffice to make out a prima

facie case for the class. While limited in scope, this analysis should also be

rigorous.

14

In re Zurn Pex Plumbing Prod. Liab. Litig., 644 F.3d at 618 (emphasis added) (internal

citations and quotation marks omitted). In assessing whether common _ issues

predominate, a court must ask “whether the common, aggregation-enabling, issues in the

case are more prevalent or important that the non-common, aggregation-defeating,

individual issues.” Tyson Foods, Inc. v. Bouaphakeo, 136 S.Ct. 1036, 1046 (2016)

(quoting 2 William B. Rubenstein, Newberg on Class Actions § 4:49 (5th ed. 2012)). If

“one or more of the central issues in the action” are common to the class and can be said

to predominate, the class may be certified under Rule 23(b)(3) “even though other

important matters will have to be tried separately, such as damages or some affirmative

defenses peculiar to some individual class members.” /d. (quoting Wright & Miller, 7AA

Federal Practice & Procedure § 1778 (3d ed. 2005)). Thus, “[p]redominance is

determined not by counting the number of common issues, but by weighing their

significance.” Lewis, 265 F.R.D. at 559 (citing Mullen v. Treasure Chest Casino, LLC, 186

F.3d 620, 627 (5th Cir. 1999)). Because the defendant's conduct is often the central

question in fraud cases, “[p]redominance is a test readily met in certain cases alleging

consumer or securities fraud or violations of the antitrust laws.” Amchem, 521 U.S. at 625.

GFA argues that no class can be certified in this case because there are myriad

individual questions that would overwhelm any common questions of law or fact. The

principal argument on this point is that each individual plaintiff will have to show proof that

it relied on GFA’s alleged misrepresentations.

For several reasons, the Court is not persuaded that reliance would defeat

predominance on any of the claims asserted in this case. As an initial matter, this

classic case of fraud, where the putative class argues that Defendants solicited monetary

15

donations after representing that those donations (which were for particular items) would

in fact be spent in the field. Thus, the paramount issues in this case center around whether

GFA, despite these representations, did not in fact spend this money in the field as

designated. If it is ultimately determined that GFA did spend the donated money as

promised, the claims asserted by all class members would be extinguished. In short, all

other questions pale in comparison. Even Mr. Mowrey, GFA’s lead counsel, has

consistently maintained that the answer to the questions of what GFA promised to do with

the money and what it in fact did with it will, above all other questions, drive the resolution

of this case and the class claims.® The Court couldn't agree more. The ability—and indeed

requirement—that each class member answer these core questions to prevail on any of

their claims demonstrates just how predominant these questions are compared to any

individual inquiries, such as damages calculations, that would be required. See, e.g.,

Amgen Inc. v. Conn. Ret. Plans and Trust Funds, 468 U.S. 455, 459 (2013) (noting that

predominance was satisfied where the answer to the central question in the case would

mean that the class would “prevail or fail in unison’).

The Court is also unpersuaded by GFA’s more specific arguments that whether

each class member relied on GFA’s misrepresentations will require extensive

individualized inquiries. For, in certain types of consumer fraud cases, courts have held

that proof of reliance does not defeat predominance where the reliance could be proven

by class-wide proof and where it was logical to infer that the class members relied on

8 See, e.g., Doc. 65, p. 80:

MR. MOWREY: “They want to—if they want this case to go forward, then they have to

provide the information showing how these monies were spent; and ultimately that’s what

this case is about is whether the monies that were taken in, how they were spent.”

16

similar representations made by defendants. For instance, in Klay v. Humana, plaintiffs

sought to maintain a putative nationwide and global class of physicians who alleged that

Humana harmed them by making similar representations claiming that the physicians

would be reimbursed for the medically necessary operations they performed and then by

failing to reimburse them. 382 F.3d 1241, 1259 (11th Cir. 2004), abrogated in part on

other grounds by Bridge v. Phx. Bond & Indem. Co., 553 U.S. 639 (2008). In rejecting a

similar argument that proof of individualized reliance by each physician on these

representations would necessarily defeat predominance, the Eleventh Circuit noted first

that the substantial number—and importance—of the common issues, such as whether

a nationwide conspiracy existed, whether there was an enterprise, and whether a pattern

of racketeering activity could be proven would “predominate over all but the most complex

individual inquiries.” /d. at 1258-59. They then noted that the nature of the alleged

misrepresentations meant that each physician in the class could prove their reliance on

these representations with identical proof. In short, they concluded:

The alleged misrepresentations in the instant case are simply that the

defendants repeatedly claimed they would reimburse the plaintiffs for

medically necessary services they provide to the defendants’ insureds, and

sent the plaintiffs various EOB forms claiming that they had actually paid

the plaintiffs the proper amounts. While the EOB forms may raise

substantial individualized issues of reliance, the antecedent representations

about the defendants’ reimbursement practices do not. It does not strain

credulity to conclude that each plaintiff, in entering into contracts with the

defendants, relied upon the defendants’ representations and assumed they

would be paid the amounts they were due. A jury could quite reasonably

infer that guarantees concerning physician pay—the very consideration

upon which those agreements are based—go to the heart of these

agreements, and that doctors based their assent upon them. . .

Consequently, while each plaintiff must prove reliance, he or she may do so

through common evidence (that is, through legitimate inferences based on

the nature of the alleged misrepresentations at issue). For this reason, this

is not a case in which individualized issues of reliance predominate over

common questions.

17

Id. at 1259.

The Second Circuit used similar reasoning in /n re U.S. Foodservice Pricing

Litigation. There, plaintiffs asserted that invoices sent to them for the services rendered

by United States Foodservice (“USF”) were being fraudulently and artificially inflated by

USF. 729 F.3d 108, 113 (2d Cir. 2013). In rejecting USF’s argument that individualized

inquiries relevant to the underlying fraud would predominate over common questions, the

Second Circuit noted that “the thrust of the RICO claim is USF’s scheme to create and

employ the VASPs to inflate the invoices so as to overbill each class member in the exact

same manner.” Id. at 119 (emphasis in original). As to the reliance and causation

elements, the Court, citing K/ay, found that the entities’ payment of these invoices was

circumstantial proof that they relied upon an implicit representation that the amount shown

on the invoice was actually (and honestly) owed. /d. at 120. Because this representation

could be shown by circumstantial class-wide proof, the individual reliance components of

the plaintiffs’ fraud and Civil RICO causes of action did not require the type of individual

inquiries that would overwhelm common questions. See also CGC Holding Co., LLC. V.

Broad & Cassel, 773 F.3d 1076, 1091 (10th Cir. 2014) (collecting other cases and noting

that “[w]hen plaintiffs are given the opportunity to present that inference as their theory of

causation, reliance, an issue often wrought with individualized inquiries, becomes

solvable with a uniform piece of circumstantial evidence.)

In the wake of these decisions, numerous district courts have found that the

predominance requirement was satisfied, notwithstanding that reliance is an element that

must be proven, where that proof could be made on a class-wide basis as a result of the

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nature of the representations made to the putative class and the ability of class-wide proof

to establish an inference of reliance and causation.

For instance, in Roberts v. C.R. England, Inc., the Court found that circumstantial

evidence of reliance was “abundant” and that the class members could all show, on a

class-wide basis, that their decision to sign on for truck driving school was made because

of the defendant’s representations that such a job would lead to a lucrative career. 318

F.R.D. 457, 514 (D. Utah 2017). In short, reliance did not defeat the predominance

requirement because the central questions of the case all centered around the allegation

that “members of the class had been exposed, through a variety of mediums, to generally

uniform representations that may have been inaccurate.” /d. Similarly, a district court in

the Eighth Circuit in Huyer v. Wells Fargo & Co. rejected an identical argument that

predominance could not be met after concluding that the payment of money in mortgage

statements sent to the putative class was circumstantial proof of reliance upon the

accuracy of the information reflected in the statement itself. 295 F.R.D. 332, 348 (S.D.

lowa 2013).

In light of these cases, the Court concludes that plaintiffs may prove their reliance

upon the implicit and explicit representations made by GFA on a class-wide basis. Just

like the plaintiffs in all the above-cited cases, the evidence submitted before the Court

demonstrates that GFA made substantially uniform representations throughout the class

period that 100% of what donors gave for sponsorship in the field would in fact be sent to

the mission field. These representations were consistently made regardless of the

medium in which the solicitations were made (i.e. GFA website, radio advertisement,

catalogue) and were confirmed when each GFA donor received a receipt containing

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similar language. Moreover, when GFA was not specifically requesting money for

particular projects (e.g. the blankets in winter or the disaster relief projects in the wake of

earthquakes), it is undisputed that it allowed donors to designate, based upon GFA-

created categories, where donated funds were being spent, either by checking a box on

paper-based order forms or by allowing a donor to see a page that shows individual items

and allowing donors to “add” the item to their shopping cart. (Doc. 1, pp. 12).

Thus, regardless of the medium or the way in which the putative class members

donated, all putative class members here are individuals who specifically designated that

their donations should be directed to the field and to particular field projects. Coupled with

GFA’s consistent guarantees to send 100% of money designated for field projects to the

field and their confirmation of this representation in each itemized receipt given to a donor,

the Court finds that class members could prove that they gave money and directed that.

money to be spent on particular projects in the field in reliance upon GFA’s numerous

implicit and explicit representations that designated money would in fact be spent in the

field. In short, just like the above cases, the element of reliance is “subsumed in the

definition of the class itself.” CGC Holding, 773 F.3d at 1092, because the class includes

only claims for donations that were designated for the field and its many projects.

Defendants contend that the above-cited cases are inapposite and that an

inference or presumption of reliance is unwarranted here because GFA is a charity.

However, there is no charity exception for fraud, Civil RICO, or unjust enrichment. If

indeed GFA made these representations and then subsequently did not send 100% of

the money to the field or spend the money in accordance with its commitments to honor

donor designations, that is actionable and can be proven on a class-wide basis. In short,

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the cases adopting an inference of reliance have done so based on the nature of the

representations that were made, not on the nature of the entity making them. Moreover,

GFA makes much of its argument that donors give for a number of reasons. While that is

assuredly true, the Court has been presented with no authority that the law requires that

the donors’ reliance on GFA’s representations be the sole cause of their injuries. For

these reasons, the Court finds that reliance is not an impediment to class certification in

this case. Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 724-25 (11th Cir. 1987) (“In

view of the overwhelming number of common factual and legal issues presented by

plaintiffs’ misrepresentation claims, .. . the mere presence of the factual issue of individual

reliance could not render the claims unsuitable for class treatment.”)

Defendants’ last argument is that proof of individual damages will also require

individual inquiries, making the claims unsuitable for class treatment. However, the

Advisory Committee rejected this very argument, writing that “a fraud perpetrated on

numerous persons by the use of similar? representations may be an appealing situation

° GFA includes certain documents where these alleged guarantees were not included or

were phrased slightly differently. However, the Court finds that this is insufficient to show

that these representations were not uniformly made or that they materially varied

throughout the class period. As GFA even admits, the representations were consistently

made, regardless of the medium, by GFA when soliciting donations and similar language

was included in the receipt sent to every donor. Moreover, in proceedings before this

Court, GFA, as early as the case management hearing, represented that “[gloing to the

heart of their allegations, we believe that we will be able to show that the monies that

were designated went to the particular items that were specified.” (Doc. 26, p. 34)

(emphasis added). It is curious 1) that GFA’s lead counsel would have consistently made

this representation if that weren’t GFA’s position and 2) that, given GFA’s consistent

position on this point, they now try to retreat from the effect of their prior representations.

Given the evidence discussed in the earlier portions of this Opinion, the Court concludes

that GFA’s representations were similar and did not materially vary throughout the class

period. A ruling to the contrary, such that the representations must be 100% identical

throughout the period, would eviscerate the class-action device in these cases and

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for a class action, and it may remain so despite the need, if liability is found, for separate

determination of the damages suffered by individuals within the class.” See 39 F.R.D. 69,

103 (1966) (emphasis added). In sum, the Court finds that the common issues of law

and fact predominate.

6. Superiority

The second and final factor to consider in the Rule 23(b)(3) analysis is whether a

class action is a superior means of resolving this dispute as compared to other litigation

methods. According to the Supreme Court, the “principal purpose” of a class action is to

advance “the efficiency and economy of litigation.” Am. Pipe & Constr. Co. v. Utah, 414

U.S. 538, 553 (1974). In this regard, Rule 23 class actions may be viewed as having been

created as a management tool to make litigation easier, not more complicated.

The class action device is clearly superior to other forms of litigation methods for

a number of reasons. First, there are over 180,000 putative class members. To the Court’s

knowledge, only one other case has been filed with similar allegations.'° Given that each

class member would need to prove their claims with similar facts and have similar

questions of law and fact to resolve, it is certainly more efficient to achieve a common

resolution of these common questions rather than to force 180,000 class members to

subvert the purposes of Rule 23. /n re First Alliance Mortg. Co., 471 F.3d 977, 992 (9th

Cir. 2006) (“The class action mechanism would be impotent if a defendant could escape

much of his potential liability for fraud by simply altering the wording or format of his

misrepresentations across the class of victims.”).

10 Dickson v. Gospel for Asia, Inc., No. 5:16-cv-05027-PKH. While that case had been

stayed pending appeal, the Eighth Circuit recently held that an arbitration provision that

the named plaintiffs—and putative class representatives—signed was valid and

enforceable and remanded the case to the district court to determine whether the

Dicksons’ donations to GFA fell within the scope of that agreement. 2018 WL 4165788,

at *2-*3 (8th Cir. Aug. 31, 2018).

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litigate separately. This is especially the case given that some of the individual class

members may be dissuaded from filing individual actions as their amount of damages in

each case could make the cost-benefit analysis inherent in litigation weigh against filing

suit. This likelihood, and the resulting efficiencies to be gained from class action

treatment, are increased because of the severe dilatory discovery tactics that GFA has

employed throughout this case. That conduct has been the subject of several prior

Opinions (in addition to the order filed separately today appointing a Special Master) and

will not be rehashed in detail here. Nevertheless, the short version is that, almost a year

after first propounding discovery to uncover evidence relevant to the central issues in this

case (whether GFA did in fact spend donated money in the field in conformity with donor

designations and their own representations), the Murphys still have no answers to this

question because GFA continues to dodge duly served requests and obfuscate where

the Court ordered it to clarify. Therefore, hoping that 180,000 different class members,

many of whom likely have small damage amounts, would have the resources (or

patience) to re-litigate these exact same issues would be a fool's errand and, as the

undersigned can attest, an enormous waste of judicial resources better deployed

elsewhere.

For the above reasons, the Court concludes that the proposed nationwide class

meets the requirements of Rule 23 and can be maintained with respect to the Civil RICO

claim. Nevertheless, the Court will slightly modify the proposed nationwide class to

explicitly exclude GFA employees and members who may be, like the Dicksons, subject

to binding arbitration agreements.

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B. Arkansas Subclass"

As the Court noted previously, because each class or subclass must independently

meet the requirements of Rule 23, the Court now must determine whether the proposed

Arkansas subclass complies with the Rule. Before turning to the analysis, the Court would

note that while Plaintiffs only expressly asked for certification of the Arkansas subclass

with respect to the ADTPA claim, they also implicitly requested to maintain a class action

with respect to the Arkansas fraud and unjust enrichment claims as well. That is because,

as the Court explained above, for those claims, the state of residency would provide the

underlying substantive law for each putative class member's claims. Therefore, in a

proposed nationwide class asserting these claims, there would be, by definition, a group

of Arkansas residents asserting fraud and unjust enrichment under Arkansas law.

Therefore, the Court considers whether the proposed Arkansas subclass could be

maintained with respect to all of the asserted claims in this case.

4. Rule 23(a)

a. Ascertainability and Numerosity

The proposed Arkansas subclass is sufficiently ascertainable by the same

objective criteria by which the national class was ascertained. Moreover, the Court finds

that the 2,608 members of the Arkansas subclass more than meet the requirement that

the class be so numerous as to make joinder of all members impracticable. (Doc. 80-4,

p. 2).

11 GFA raises many of the same arguments with respect to the Arkansas subclass as it

did for the proposed nationwide class. Because the Court has rejected many of these

arguments previously, it will not recap those rulings, but will incorporate them herein with

respect to the Arkansas subclass.

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b. Commonality, Typicality, and Adequacy of Representation

Clearly, given the discussion above, there are numerous questions of law and fact

common to the Arkansas subclass for each of these causes of action. Whether GFA

fulfilled its commitments to spend the donated money in the field and for the designated

purposes is obviously the question most central to resolution of each of these claims, and

“determination of its truth or falsity will resolve an issue that is central to the validity of

each one of the claims in one stroke.” Dukes, 564 U.S. at 350.

The typicality problems discussed above with respect to maintaining a nationwide

class asserting fraud and unjust enrichment claims entirely disappear when limiting the

fraud and unjust enrichment claims to Arkansas class members. For, the Murphys’ claims

of unjust enrichment and fraud under Arkansas law are clearly typical of the claims

asserted by other Arkansans. Lafollette v. Liberty Mut. Ins. Co., 2016 WL 4083478, at *7

(W.D. Mo. 2016) (finding that class definition satisfied typicality requirement where class

was limited to Missouri policyholders to whom the same legal standards and methods of

contract interpretation apply). Thus, the additional concerns about different standards of

proof and scienter simply are not relevant as the Murphys and the other Arkansas class

members would be advancing identical legal theories and proof. Paxton, 688 F.2d 552.

GFA has not advanced any other persuasive reason why the Murphys’ claims would be

atypical of the other Arkansas subclass members.

Similarly, the Court finds, for the reasons it did with respect to the nationwide class,

that the Murphys would be more than adequate representatives of the Arkansas subclass

and that the Stanley Law Group and Bassett Law Firm are capable firms with significant

expertise in handling class action litigation.

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2. Rule 23(b)(3)

a. Predominance

GFA again argues that individual proof of reliance and proof of damages would

defeat predominance as to the Arkansas subclass. The Court rejects those arguments

for the same reason it rejected their arguments as to the nationwide class. In short, the

common questions of law and fact predominate over any of these individual questions

and putative members can establish proof of reliance by class-wide proof given the nature

of the alleged misrepresentations.

However, further comment with respect to the ADTPA claim is warranted. First,

Arkansas law is clear that “[oJur law is now well settled that the mere fact that individual

issues and defenses may be raised by the defendant cannot defeat class certification

where there are common questions concerning the defendant’s alleged wrongdoing that

must be resolved for all class members.” DIRECTV, Inc. v. Murray, 423 S.W.2d 555, 565

(Ark. 2012); see also In re Dial Complete Mktg. & Sales Practices Litig., 312 F.R.D. 36,

58 (D.N.H. 2015). Second, the Court is of the view that the question of whether GFA’s

representations were accurate is of paramount importance to Plaintiffs’ ability to succeed

under the ADTPA claim, as the law specifically defines an unconscionable trade practice

to include “[mJaking a false representation that contributions solicited for charitable

purposes shall be spent in a specific manner or for specified purposes.” See Ark. Code

Ann. § 4-88-107(a)(7). Thus, the veracity, or lack thereof, of GFA’s numerous

representations (both more generally as to sending money to the field and more

specifically as to fulfilling donor designations) fall near the very heart of the wrongs the

ADTPA was designed to remedy. Finally, as this Court noted recently, amendments to

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the ADTPA became effective August 1, 2017, which have the effect of prohibiting

individuals from bringing class action lawsuits for violations of anything other than

provisions of the Arkansas Constitution. Mounce v. CHSPSC, LLC., 2017 WL 4392048,

at *6-7 (W.D. Ark. 2017). However, for the same reasons explained in that opinion, this

change to the ADTPA will not be given retroactive application, as it is a procedural rule

which directly conflicts with Rule 23 and as the actionable conduct in this case began well

before this amendment was implemented. /d. at *7.

Therefore, the Court concludes that the common questions of law and fact central

to each of the claims asserted by the Arkansas subclass predominate over any individual

inquiries, such as damages, that may be required.

b. Superiority

For the reasons explained above with respect to the nationwide class, the Court

finds that maintenance of these claims as a class action would be more efficient and

superior to other methods of adjudicating the controversy. Moreover, while maintaining

the nationwide class with respect to the entire fraud and unjust enrichment claims would

have presented numerous management problems, these problems are not present when

the claims litigated on a class-wide basis are claims asserted under Arkansas law. In

short, resolving these claims on a class-wide basis has ail the benefits of a class action

without any of the managerial issues that would have been caused by differing standards

of proof or conflicting legal theories.

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IV. CONCLUSION

In light of the above discussion, IT IS THEREFORE ORDERED that Plaintiffs’

Motion to Certify Class (Doc. 48) is GRANTED IN PART AND DENIED IN PART as

follows:

IT IS ORDERED that a nationwide class, defined as follows, is certified to pursue

the Civil RICO claim:

All persons in the United States who donated money to GFA from January

1, 2009 through the date the Class is certified for Project Codes 1000-4900.

Excluded from the Class are unknown donors; Defendants, their

subsidiaries, affiliates, and employees;'? all persons who make a timely

election to be excluded from the Class; governmental entities; the Special

Discovery Master appointed in this case; and the Judge to whom this case

is assigned and his/her immediate family.

IT IS FURTHER ORDERED that the following subclass is certified to pursue claims

for fraud, unjust enrichment, and violations of the ADTPA under Arkansas law:

All persons in Arkansas who donated money to GFA from January 1, 2009

through the date the Class is certified for Project Codes 1000-4900.

Excluded from the Class are unknown donors; Defendants, their

subsidiaries, affiliates, and employees; all persons who make a timely

election to be excluded from the Class; governmental entities; the Special

Discovery Master appointed in this case; and the Judge to whom this case

is assigned and his/her immediate family.

IT IS FURTHER ORDERED that Plaintiffs Garland D. Murphy, lil, M.D. and Phyllis

Murphy are designated as Class Representatives for both defined classes.

IT IS FURTHER ORDERED that, in consideration of the affidavits and CVs that

were attached to Plaintiffs’ Motion to Certify Class, and in light of the lack of objection by

12 Again, this minor change to the proposed classes is made to explicitly exclude any GFA

member who, like the Dicksons, is potentially subject to an arbitration agreement that

would affect their ability to join the class action.

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Defendants, the Court designates the Stanley Law Group as Lead Class Counsel and the

Bassett Law Firm as Class Counsel.

IT IS FURTHER ORDERED that no later than October 10, 2018, Lead Class

Counsel must submit a motion for approval of a proposed plan of notice and the proposed

notice forms, in accordance with Rule 23(c)(2)(B). According to the Rule, the proposed

notice should be “the best notice that is practicable under the circumstances” and should

“clearly and concisely state in plain, easily understood language” all the information set

forth at subsection (c)(2)(B)(i)-(vii). +h

IT 1S SO ORDERED on this [0 day of September, 2018.

Lo

LS

Je HY LBA OOKS

“UNITE®*STATES DISTRICT JUDGE

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