Opposition Brief — H&R Block, Inc. v. Carnegie

Supreme Court, U.S. |

C3) ec — |

No. 04-518 OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

H&R BLOCK, INC., H&R BLOCK SERVICES, INC.,

H&R BLOCK EASTERN TAX SERVICES, INC.,

BLOCK FINANCIAL CORP. and HRB ROYALTY, INC.,

Petitioners,

V.

LYNNE A. CARNEGIE,

on behalf of herself and all others similarly situated,

Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES CourRT OF APPEALS

FOR THE SEVENTH CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION

STEVEN E. ANGSTREICH RoGER W. KirBy

MICHAEL CoREN Counsel of Record

CAROLYN LINDHEIM PETER S. LINDEN

Levy, ANGSTREICH, FINNEY, KirBy McINERNEY

BALDANTE, RUBENSTEIN & Squire LLP

& Coren, P.C. 830 Third Avenue

1616 Walnut Street New York, NY 10022

Fifth Floor (212) 371-6600

Philadelphia, PA 19103

Attorneys for Respondents

(Additional Counsel Listed on Signature Page)

i

COUNTER QUESTION PRESENTED

This petition follows an earlier petitioner’s effort to

obtain approval of a settlement that the Seventh Circuit rejected

on intimations of collusion, and that the district court then

finally refused to approve. In that settlement process: (a)

petitioner drafted or acquiesced in a complaint that contained

the RICO class claims that it now would dismiss; (b) over many

years, both before and after the Seventh Circuit rejected that

settlement, petitioner repeatedly used and vigorously supported

the settlement class to secure nationwide anti-suit injunctions

against other prior filed class actions; and (c) reaped tens of

- millions of dollars by its misconduct and use of this RICO class

to obtain anti-suit injunctions. Under these specific

circumstances:

Did the court of appeals misapply this Court’s

precedents in holding defendant petitioner estopped from

challenging a rule 23(b)(3) RICO class certification?

TABLE OF CONTENTS

Page No

COUNTER QUESTION PRESENTED ............. i

TABLE, OF CORTEEEED se csvctasesanprcncsverces ii

TABLE OF AUTHORITIES .............0ceeeeee ili

COUNTERSTATEMENT OF THE CASE .......... 1

REASONS FOR DENYING THE WRIT ............ 8

Point I. _ The Court’s Estoppel Holding is

Simply a Fact-Specific Application

of This Court’s Precedent ............ 10

Point II. The Manageability of This Class

Action Presents No Issue of

Systemic Importance ................ 11

ili

TABLE OF AUTHORITIES

Cases

Amchem Products, Inc. v. Windsor,

gi EF ee 4,9, 11

Broussard v. Meineke,

155 F.3d 331 (4" Cir. 1998) ...... wien ds TER 6

Buford v. H&R Block, Inc.,

168 F.R.D. 340 (S.D. Ga. 1996),

aff'd, 117 F.3d 1433 (11" Cir. 1997) ........ 7,11

Gunnells v. Healthplan Servs., Inc.,

348 F.3d 417 (4 Cir. 2003) ............... 6, 12

Henry v. Cash Today, Inc.,

199 F.R.D. 566 (S.D. Tex. 2000) .............. 13

Holmes v. Securities Investor Protection Corp.,

Et ene frre ror rere 12

In re Sumitomo Copper Litigation,

194 F.R.D. 480 (S.D.N.Y. 2000),

app. denied, Sumitomo Copper Litigation v.

Credit Lyonnais Rouse, Ltd.,

262 F.3d 134 (2nd Cir. 2001)................. 13

In re Synthroid Marketing Litigation,

198 F.RD. 287 ND. T1999) . 0. ccc ccc eee 13

JTH Tax Inc. v. H&R Block Eastern Tax Services, Inc.,

128 F. Supp 2d 926 (E.D.Va 2001),

aff'd in part and remanded in part,

iv

28 Fed. App. 207 (4th Cir. 2004) ............... 8

Klay v. Humana, Inc.,

382 F. 3d 1241 (11 Cir. 1241) (11% Cir. 2004),

pet for cert filed sub nom,

United Health Group, Inc., et. al. v. Klay

ee AE 6 Nach os ec cer eeeeen was 6, 12, 13

Kleven v. Household Bank, F.S.B.,

334 F.3d 638 (7" Cir.),

cert. denied, 124 S.Ct. 924 (2003) .............. 8

New Hampshire v. Maine,

Bere errrr rere r er ree 10

Peterson v. H & R Block Tax Services, Inc.,

174 PRD. FO GUID TAGS) ove ccccccesess 13

Poulous yv. Caesar’s World, Inc.,

379 F.3d 654 (9 Cir. 2004) ............. 6, 12, 13

Rodriguez v. McKinney, 7

156 F.R.D. 112 (E.D. Pa. 1994) ...........045. 13

Sandwich Chef of Texas v. Reliance National

Indemnity Company,

319 F.3d 205 (Sth Cir.),

cert. den., 1248S. Ct. 101 (2003) ............ 6, 12

Sikes v. Teleline, Inc.,

281 F.3d 1350 (11% Cir, 2002)... 0. cease eee. 6

Smith v. MCI Telecommunications Corp.,

124 F.R.D. 665 (D. Kan. 1989) ............... 13

Vv

Spark v. MBNA Corp.,

178 F.R.D. 431 (D. Dal. 1998) 2.0... ccc cceee 13

Waters v. International Precious Metals Corp.,

172 F.R.D. 479 (S.D. Fla. 1996) .............. 13

Statutes

18 U.S.C. $1961 of 90g, 2... 6c ccees Soa abe passim

eae se es ee pated ween passim

Fed. R. Civ. P. 23(c)(4M(A) ........ absce asin at passim

Other Authorities

18 Moore’s Federal Practice

Be i Pereer rer ery rere ree 10

—o ooo rl ee

1

Respondents request that the Court deny the petition for

a writ of certiorari seeking review of an opinion of the Court of

Appeals for the Seventh Circuit (reproduced at App. 1a-12a).

Citations herein to the opinions below are to the pages of the

copies attached as an appendix to the petition.

COUNTERSTATEMENT OF THE CASE

A brief description of the relevant facts shows that this

petition presents nothing more than non-recurring, fact-specific

issues that present no occasion for this Court’s review. The

court below, in an opinion by Judge Posner, affirmed a district

court order certifying a rule 23(b)(3) class against the defendant

petitioner Block entities (the various H&R Block entities

generally are referred to here as “defenclant”) on mail and wire

fraud charges under RICO, 18 U.S.C. §§ 1961-68.

The court did not hold, as co-defendant Household’s

supporting brief repeatedly asserts (HH Br. at 2, 5, 7-8, 9-13,

17)', that judicial estoppel bars a settling party from objecting

to class certification, except in grounds of manageability, where

the settlement has been rejected. Rather, the decision is a

straightforward, completely fact-specific application of this

Court’s well-settled precedents governing judicial estoppel.

Here, the court applied judicial estoppel to a peculiar instance

where defendants purposefully benefitted from the settlemeni

class both before and after it had been rejected.

Second, petitioners contend thet there is a circuit split

concerning the relationship of RICO and individual reliance in

a class setting. There is no split where, as here, the operative

complaint alleges uniform omissions. None of petitioners’

; “HH” refers to the brief of the Household defendants.

Household is the successor in interest to Beneficial National Bank.

2

citations holds that individual reliance must be shown to sustain

a RICO class claim arising out of uniform omissions (see fn. 5

below).

Petitioner H&R Block marketed its “instant tax refund”

program as part of its tax preparation services. Far from

obtaining an instant refund, trusting and vulnerable taxpayers

unknowingly received short-term, high interest bank loans,

generally from co-defendant Beneficial National Bank:

“Although the bank is the lender, the tax preparer [Block]

arranges the loan . . . [and] the customer is told neither that the

bank pays the tax preparer a fee for having generated the loan

nor that the tax preparer receives an ownership interest in the

loan” (App. 2a). These loans generate huge profits. “The

annual interest rate on such a ‘refund anticipation loan’ (RAL)

will often exceed 100%”(App. 2a). The plaintiff, for example,

“paid charges of $110 on a nine-day loan of $500” (App. 13a).

Beginning in the early 1990s, numerous class actions

were brought throughout the country against defendant

asserting various federal and state law claims. Of special

significance, the Supreme Court of Texas had affirmed

certification of a state-wide class action in which defendant

faced significant monetary exposure. “The total amount

sought,” observed Judge Posner, “could have reached $2

billion” (App. 36a). The present class action was filed in the

Northern District of Illinois by prior class plaintiffs and their

since defrocked counsel. Despite virtually no litigation activity

by class counsel, defendants and plaintiffs proposed a

nationwide settlement (App. 57a). A district judge approved

that settlement in July 2000, overruling objections that the

settlement was a sellout by supine class counsel interested only

in securing fees. The court also certified the settlement class,

which asserted the RICO class claim now under attack.

Defendant participated in drafting and acquiesced in the

Silica

3

settlement complaint that contained the RICO allegations

defendant now questions (App. 16a-17a). Then, defendant

vigorously supported the propriety of the class, of the

settlement, and of this RICO class claim (see App. throughout).

Defendant also persuaded the judge to enter a nationwide anti-

suit injunction, which among other things, halted the Texas

proceeding on the very eve of trial (App. 36a-37a.).

The Seventh Circuit rejected the settlement and vacated

the anti-suit injunction (App. 28a-47a). The court decried class

counsels’ “singularly feeble” representation, and it concluded,

inter alia, that counsel were “almost certainly inadequate”(App.

38a). The court ordered that further proceedings in the district

court be before a different judge.

On remand, defendant again defended the propriety of

the RICO class and “vigorously argued for (the settlement’s]

renewed approval” (App. 50a), insisting that the settlement

class could be maintained, and that the remand was intended

only to cure minor evidentiary deficiencies in the record. Once

again, defendant sought to restrain the Texas proceeding and

others (App. 50-51a).?- The application of estoppel principles

. In addition of the injunction of Haese v. H&R Bloc, Inc.,

et al, No. 96-423 (Tx. Dist. Ct. Kleberg Cty,) in Green v. H&R Block, Inc.,

No. 24-C-97-196023 (Md. Cir. Ct.), throughout: April 2002 Block sought to

stay the Maryland trial due to the revised settlement for the existent class,

and to delay the start of the Maryland trial. On February 10, 2003, ten

months after the Seventh Circuit had rejected the settlement (App. 28a ef

seq.), the Green court granted the relief sought by petitioners.

Also post-remand, Block likewise scught a stay of the Alabama

proceeding styled Mitchell v. H&R Block, Inc., 2t al., No. CV-95-2074 (Ala.

Cir. Ct.), asserting in December 2002 that because the class “remains

certified,” the Mitchell case should remain on the administrative docket.

In Affatato v. Beneficial Corp., Case No. 1:96 CV 5376. Dkt. No.

4

to class action settlements thus arose in the peculiar

environment of a defendant urging the continued existence of

the class and profiting thereby even after the settlement had

been rejected on appeal. After an evidentiary hearing at which

defendant proffered numerous legal and economic experts

(App. 51a), the district court rejected the settlement,

disqualified class counsel as inadequate, and allowed for the

appointment of new class plaintiff and counsel (App. 48a-75a).

No appeal was taken from these orders (App. 3a-4a).

The district court subsequently granted rule 23(b)(3)

certification of the new class plaintiff's RICO claims, ones that

substantively echo the settlement complaint that defendant had

drafted or acquiesced in (App. 13a-27a). The court recognized

(App. 23a) that, under Amchem Products, Inc. v. Windsor, 521

U.S. 591, 620-21 (1997), classes certified for settlement

purposes must satisfy all the requirements of rule 23(b)(3),

except that of manageability. The court concluded that the class

action was manageable, in the process noting that defendant’s

counsel had “participated in drafting a previous complaint

alleging violations of RICO” (App. 16a-17a).

The Seventh Circuit affirmed (App. 1a-12a). It found

that, except for the issue of “manageability,” defendant was

estopped from challenging the propriety of rule 23(b)(3) class

certification — “especially in a case in which the defendants

were enthusiastic proponents of class treatment until their

opportunistic change of heart” (App. 12a). Judge Posner noted

115, defense counsel advised of the Seventh Circuit decision and asked that

the Affatato action be held in abeyance. The Affatato court stayed its hand

instead of ruling on a fully briefed class motion and on a partial summary

judgment motion on which briefing had commenced and which had

potentially serious consequences to defendants; Dkt. No. 113 (continuing

stay).

5

that, contrary to the claim here, the estoppel resulted from far

more than a simple “change of legal position”:

“f Defendants were enthusiastic proponents of

class treatment until their opportunistic change

of heart.” (App. 12a); see also, 20a-21a:

“Defendants do not even argue that they

obtained no benefit from the injunctions”.

Judge Posner went on to reject the two other arguments

advanced in this petition: (1) that because of a supposed

“reliance” requirement a civil RICO suit could not be certified

as a class action (see App. 6a-10a); and (2) a prior unreviewed

interlocutory ruling by a Georgia district court denying class

certification should have been given nationwide preclusive

effect not because of any precedent of this Court, but because

of one that defendant imputes to the Seventh Circuit (see App.

9a-12a).°

Defendant pins its -eliance argument on

misrepresentations. The complaint, however, does not. It rests

upon omissions.’ The Seventh Circuit easily recognized this as

substantially an omissions case: “It is contended that the

customer is told neither that the bank pays the tax preparer a fee

for having generated the loan nor that the tax preparer receives

an ownership interest in the loan” (App. 2a-3a; 30a).

Defendant’s revision of the operative complaint essentially

means that their proffered body of authorities is without

, Defendants aiso claim that the burden of proof respecting

class certification was inappropriately shifted to them. The district court

explicitly said otherwise (“It is [plaintiff] who bears the burden of

demonstrating manageability...” (App. 24a] (emphasis in original)).

, The complaint has a section entitled “The Uniform

Omissions” containing twenty paragraphs of them.

6

pertinence, as is of course any question of the relationship

among RICO, reliance, and misrepresentations. But to be

unequivocal, neither petitioner has identified any authority that

class allegations of RICO violations concerning uniform

omissions require individual reliance.’

In the event, the only open issue in the court of appeals

was manageability of the rule 23(b\(3) class. Defendant’s

conduct had estopped it from challenging any other aspect of

class certification, and on the facts this class action, grounded

on uniform omissions, is clearly manageable. Moreover,

whether the mail and wire fraud statutes were violated by a

“scheme or artifice” to defraud is a question different from

“whether or not the scheme succeeds and therefore causes

injury” (App. 9a). But no need exists to pursue the inquiry

further here. The petition presents only the question of the

application of estoppel principles to unusual, if not singular,

case-specific facts. Were the petition to present only the

. See Sikes v. Teleline, Inc., 281 F.3d 1350, 1364 (11" Cir.

2002) (decertifying class because of issues of individual reliance on

numerous materially-differing misrepresentations); Poulos v. Caesars World,

Inc., 379 F.3d 654, 666-67 (9 Cir. Aug. 10, 2004) (affirming refixsal to

certify class; explicitly stating that the case essentially involved affirmative

misrepresentations rather than omissions); Sandwich Chef of Texas, inc. v.

Reliance Nat. Indem. Ins. Co., 319 F.3d 205 (Sth Cir. 2003); Klay v.

Humana, Inc., 382 F.3d 1241 (11 Cir. 2004), petition for cert. filed, 73

USLW 3260 (Oct. 10, 2004) (affirming class certification in case involving

misrepresentations and omissions); Gunnells v. Healthplan Servs., Inc., 348

F.3d417 (4* Cir. 2003) (in non-RICO context, affirming class certification

against central corporate defendants and reversing class certification on

claims against 23 agents who marketed and sold health plan via alleged

misrepresentations); Broussard v. Meineke, 155 F.3d 331, 343-44 (4® Cir.

1998) (involving misrepresentations and omissions in non-RICO context,

holding lower court’s class certification to have been error because

commonality, typicality and adequacy requirements of Rule 23(a) had not

been met, because inter alia defendant directed “different representations to

different franchisees”).

7

question of manageability if all other requirements of rule

23(b)(3) are assumed to be satisfied, that too would be case-

specific.

Expressing extreme skepticism as to the merits of

defendant’s preclusion argument (App. 9a-1 1a), Judge Posner’s

specific conclusion was that defendant had been estopped from

making the argument because it consciously waited four years

“until the settlement was finally rejected” to raise the issue.

“(I]t is too late for the defendants to plead collateral estoppel

when, though knowing of the Buford® decision, which was

issued in 1996 and affirmed the following year, they insisted

until [2003], when the district court on remand from our

decision threw out the settlement, that class treatment of the

RICO claim was entirely appropriate” (App. 1 1a).

é Buford v. H&R Block, Inc., 168 F.R.D. 340 (S.D. Ga.

1996), aff'd, 117 F.3d 1433 (11™ Cir. 1997) (per curiam).

|

8

REASONS FOR DENYING THE WRIT

The brief statement of the case shows that the courts

below decided nothing more than fact-specific, non-recurring

issues invoking conventional estoppel principles. This provides

no warrant for this Court’s review.

Despite its highly publicized, user-friendly advertising

campaigns, defendant in fact prays upon vulnerable, low-

income taxpayers, omitting material information in order to

impose extraordinarily high interest rates and other charges

upon the unwitting clientele, individuals living in the poorest

neighborhoods.’ While defendant bases its reliance argument

on misrepresentations, the complaint rests upon omissions. The

Seventh Circuit: “It is contended that the customer is told

neither that the bank pays the tax preparer a fee for having

generated the loan nor that the tax preparer receives an

ownership interest in the loan” (App. 2a-3a; also, 30a).

Defendant’s revision of the operative complaint essentially

means that their proffered body of authorities is without

pertinence, as of course is its question of the relationship among

RICO, reliance, and misrepresentations. Determinative for

petition purposes is that the decision below rejected defendant’s

contentions regarding RICO also on estoppel grounds (9a-12a).

Seeking to stave off liability from numerous lawsuits

while simultaneously maintaining its huge profits from its

conduct with the willing assistance of feeble, fee-driven class

. These characterizations are those of the Eastern District

of Virginia excoriating defendant’s conduct. JTH Tax Inc. v. H&R Block

Eastern Tax Services, Inc., 128 F. Supp 2d 926, 933, 938 (E.D.Va 2001),

aff'd in part and remanded in part, 28 Fed. App. 207, 211, 214 (4® Cir.

2004), and the Seventh Circuit in Kleven v. Household Bank, F.S.B., 334

F.3d 638 (7™ Cir.), cert. denied, 124 S.Ct. 924 (2003).

9

counsel, defendant constructed and vigorously maintained a

nationwide settlement of all claims against it, including this

RICO class claim. Even after remand, defendant repeatedly

sought, and secured, nationwide anti-suit injunctions and stays,

halting all other challenges to its conduct (App 20a-21a).

“Defendants do not even argue that they obtained no benefit

from the injunctions” (App. 21a). All totaled, petitioner spent

four years on the insistent premises that the action, including its

RICO class claim, was sustainable and class worthy. Along the

way, defendant exhausted considerable time and energy of the

courts and litigants. For all those years until the court threw out

the settlement in 2003, petitioner “desperately wanted the RICO

claim included in the class settlement . . .” (App. 11a).

Also, throughout the settlement proceedings defendant

vigorously defended the propriety of the class as satisfying all

prerequisites of rule 23(b)(3). See Amchem Products, supra,

521 U.S. at 620-21. Even after the court of appeals had

overturned the settlement and vacated the injunctions,

defendant strongly defended both the class and the class

settlement. On remand, it submitted extensive briefs and

affidavits to support the propriety of the class and of the class

settlement. It continued strenuously to seek to halt proceedings

everywhere (see fh. 2 supra), even having the temerity to ask

the district court again to stay the Texas state court proceedings.

Applying this Court’s non-controversial estoppel

precedents, the Seventh Circuit held that defendant was

precluded from raising any certification issue with respect to the

Rule 23(b)(3) RICO class other than manageability (App. 4a-

7a). And as to the only issue properly before it, the court

concluded that on the particular record the class action was

manageable. These narrow, fact-bound conclusions provide no

basis for a call on this Court’s resources.

10

Point I. The Court’s Estoppel Holding is

Simply a Fact-Specific Application

of This Court’s Precedent

The meaning of this Court’s precedents on judicial

estoppel is not drawn in controversy here. New Hampshire v.

Maine, 532 U.S. 742, 749 (2001). “{W]here a party assumes a

certain position in a legal proceeding, and succeeds in

maintaining that position, he may not thereafter, simply because

his interests have changed, assume a contrary position...” See

also 18 Moore’s Federal Practice § 134.30, pp. 134-62 (3d ed.

2000); App. 4a-Sa. The petition does not ask the Court to

reconsider them or to reformulate them. No circuit split is

alleged to exist. Rather, the petition merely argues that the

Court’s principles have been misapplied on the unusual facts of

this case (Pet. pp. 23-30). This argument, we note, comes from

a defendant who throughout this extended litigation, even after

the Seventh Circuit rejected the settlement, sought to use this

class action as a vehicle by which it would secure a plenary

indulgence from all meaningful liability for its deceptive

conduct, and the RICO claim in particular; defendant

“desperately wanted the RICO claim included in the class

settlement . . .” (App. 11a). To that purpose and with

acquiescence of supine class counsel (App. 30a-33a, 38a, 52a-

64a, 74a-75a), defendant helped draft a complai containing

the very RICO claims asserted here (App. 16a-17a), and sought

to enjoin all other proceedings (App. 5a, 20a-21a, 36a-37a,

56a). Tens of millions of dollars in profits were obtained

during this period. For their part, “defendants do not even

argue that they obtained no benefit from the injunctions” (App.

21a). In finding an estoppel, Judge Posner emphasized these

very facts (App. 3a-Sa). This holding provides no occasion for

this Court’s intervention: nothing more is involved than a fact-

dependent, non-recurring application of settled judicial

11

Defendant’s apparent claim that the district court should

have accorded preclusive effect to an order of a Georgia district

court opinion denying class certification also was rejected on

fact-specific estoppel grounds (App. 9a-lla).’ As to the

decision, defendant “prevailed in the present litigation, until the

settlement was finally rejected, by arguing that Buford was

wrong. They are estopped to argue now that it was right” (App.

11a).

So far as preclusion is concerned, there is no claim of

conflict with any decision of this Court or ofa circuit split, only

that the decision may conflict with other decisions within the

Seventh Circuit itself. Why such a conflict is of concern in this

Court is never made clear. See Rule 10 of the Rules of this

Court. In the event, the only issue on this petition is whether

defendant is estopped from raising a preclusion claim because

for four years, “until the settlement was finally rejected,” it took

the opposite position. That question, wholly fact-specific and

entirely unique, is not an issue for the exercise of this Court’s

scarce jurisdiction.

Point II. The Manageability of This Class Action

Presents No Issue of Systemic Importance

The courts below held that defendant was estopped from

challenging any of the elements of the rule 23(b)(3) class action

certification, except that of “manageability.” Amchem

Products, supra, 521 U.S. at 620-21. Although the courts

addressed the manageability of the proposed RICO class, it also

was clear that insofar as defendant’s manageability argument

: This petition in this Court is unclear as to the significance

of Buford (Pet. 10-11, 19, 21). Defendant seems to have retreated from the

preclusion argument it advanced in the court below. We nonetheless address

the Seventh Circuit’s rejection of the preclusion claim.

12

rested on RICO, defendant was estopped, in this case and its

particular history, from pressing that (App. 4a-12a).

Altematively, both courts found that requirement satisfied

because, so far as manageability is concerned, liability — which

turned on defendant’s substantially uniform omissions in failing

to disclose (App. 2a-3a; 30a) — could be separated from those

of individual injury (App. 6a-7a, 10a), and besides courts have

not held that individual reliance need be shown in such RICO

class proceedings (see fn. 5 above and fn. 10 below).

Yet, defendant seeks to persuade that this is an

appropriate occasion to elaborate upon Holmes v. Securities

Investor Protection Corp., 503 U.S. 258 (1992), in the class

action context. The Court is asked to consider whether the

“predominance requirement’ under rule 23 prevents RICO

certification because “each class member must individually

prove reliance in order to establish a meritorious claim.”

Question Presented, par 1. Point 1 (Pet. p. 14) claims the

“need to prove individual reliance when determining whether

common issues predominate under Rule 23(b)(3)”. This

petition is a singularly inappropriate vehicle to address that

issue. Defendant, the court below found, is estopped from

challenging any requirement other than manageability and that

estoppel includes predominance. Manageability is all Judge

Posner addressed.’ (App. 6a-9a).

<% Defendant suggests a conflict between this decision and

others, including the Fifth Circuit’s decision in Sandwich Chef of Texas v.

Reliance National Indemnity Company, 319 F.3d 205 (Sth Cir.), cert. den.,

124 S. Ct. 101 (2003). Other differences aside (see fn. 5 supra), Sandwich

Chef (and other decisions cited by defendant) concerned rule 23’s

“predominance” requirement — a requirement defendant is estopped from

contesting — not manageability, which is the only issue on this petition. See

Sandwich Chef, 319 F. 3d at 221, Poulous, 379 F.3d at 665-66, Gunnells,

348 F.3d at 434-37, and Klay, 342 F.3d. 1241.

13

Defendant thus invites the Court to fight through and

resolve the fact-specific issue of estoppel before it can properly

consider any issue related to the Rule 23(b)(3) predominance

requirement. It is of course telling that, throughout their

arguments about unmanageability and conflicts, neither

defendant nor Household makes contact with or proffers

citations concerning RICO and uniform omissions, the

operative contentions (see App. 2a-3a; 30a).'° Manageability

rs: For completeness, numerous decisions favor certification

of Rule 23(b)(3) RICO classes especially when the claims are based on

uniform non-disclosures, and reject challenges based upon various

requirements of rule 23(b)(3), not just manageability. See, for example:

Poulous v. Caesar's World, Inc., 379 F.3d at 666-67 (recognizing the

difference in RICO cases between affirmative misrepresentation and failure

to disclose cases); Klay v. Humana, Inc., 382 F. 3d 1241 (11" Cir. 1241)

(11" Cir. 2004), pet for cert filed sub nom, United Health Group, Inc., et. al.

v. Klay (Oct. 19, 2004); In re Sumitomo Copper Litigation, 194 F.R.D. 480

(S.D.N.Y. 2000), app. denied, Sumitomo Copper Litigation v. Credit

Lyonnais Rouse, Ltd., 262 F.3d 134 (2d Cir. 2001) (concealing conspiracy

to fix prices); Jn re Synthroid Marketing Litigation, 188 F.R.D. 287 (N.D.

Ill. 1999) (concealing negative information about drug); Waters v.

International Precious Metals Corp., 172 F.R.D. 479, 504-06 (S.D. Fla.

1996) (concealing excessive trading scheme; contains lengthy discussion of

why RICO claims are appropriate on class-wide basis; allowing plaintiffs a

presumption of reliance given alleged fraudulent omissions); Peterson v. H

& R Block Tax Services, Inc., 174 F.R.D. 78 (N.D. I11.1997)

(misrepresenting availability of rapid refund to Earned Income Tax Credit-

claiming taxpayers and omitting fact that EITC-claiming taxpayers were not

eligible for rapid tax return); Spark v. MBNA Corp., 178 F.R.D. 431 (D. Del.

1998) (certifying RICO class of credit card holders alleging

misrepresentations in marketing of credit cards; allows presumption of

reliance); Henry v. Cash Today, Inc., 199 F.R.D. 566 (S.D. Tex. 2000)

(misrepresentations and omissions in making high-interest “payday” loans);

Rodriguez v. McKinney, 156 F.R.D. 112 (E.D. Pa. 1994) (misrepresenting

benefits of educational curriculum provided by school in order to obtain

government funding for student loans); Smith v. MCI Telecommunications

Corp.,i24 F.R.D. 665, 679 (D. Kan. 1989) (MCI’s commission plan for

salespeople contained misrepresentations and omissions). Petitioners were

defendants in Peterson decision, supra. That court certified a RICO class

14

alone is the possible issue left to defendant here, and in finding

this requirement satisfied, the courts below broke no new

ground. A class action in which the issue of liability is properly

separated from that of individual injury is surely manageable.

See rule 23(c)(4)(a) (“an action may be brought or maintained

as a class action with respect to particular issues”). This

petition concerns the application of non-controversial judicial

estoppel principles to a narrow, non-recurrent body of facts.

This is not a matter of systemic importance warranting this

Court’s intervention.

against petitioners arising from omissions/misrepresentations in connection

with a particular branch of the RAL process.

1S

CONCLUSION

The petition for certiorari should be denied.

Dated: November 30, 2004

Respectfully submitted,

Roger W. Kirby, Esq.

Counsel of Record

Peter S. Linden, Esq.

Kirby McInerney & Squire LLP

830 Third Avenue

New York, NY 10022

(212) 371-6600

Steven E. Angstreich, Esq.

Michael Coren, Esq.

Carolyn Lindheim, Esq.

Levy, Angstreich, Finney, Baldante,

Rubenstein & Coren, P.C.

1616 Walnut Street, 5" Floor

Philadelphia, PA 19103

Counsel for Respondents

Of Counsel:

Ronald L. Futterman, Esq.

Futterman & Howard, Chtd.

122 South Michigan Avenue

Suite 1850

Chicago, IL 60603

16

Michael B. Hyman, Esq.

Much Shelist Freed Denenberg

Ament & Rubenstein, P.C.

191 North Wacker Drive, Suite 1800

Chicago, IL 60606-1615

Steven A. Martino, Esq.

W. Lloyd Copeland, Esq.

Taylor, Martino, P.C.

Southtrust Bank Building

61 St. Joseph Street

Suite 1600

Mobile, AL 36602