In Re: U.S. Foodservice Inc. Pricing Litigation; Catholic Healthcare West v. U.S. Foodservice Inc.
A court can order class-action certification based on allegations that uniform misrepresentations were made to all members of a putative class. Plaintiffs alleged that defendant USF, or U.S. Foodservice, the country's second largest food distributor, fraudulently overbilled, in violation of RICO, the Racketeer Influenced and Corrupt Organization Act, 18 United States Code §1961. Customer costs are based on prices that USF's suppliers charge, plus the surcharges that USF charges. Customers alleged that USF's invoices misrepresented its costs. The plaintiffs requested class-action certification. USF objected that contracts were not uniform and that individualized, extrinsic evidence will be required. The District Court, Droney, J., found that USF's cost-plus contracts are substantially similar, that the plaintiffs established that pertinent issues are susceptible to generalized proof and that common issues predominate. The District Court granted class-action certification to approximately 75,000 "cost-plus" customers. USF appealed. To obtain class-action certification, a plaintiff must establish numerosity, commonality, typicality and adequacy of representation; that questions of law or fact common to class members predominate over questions that affect individual members; and that a class action is superior to other methods of resolution. Fraud claims based on uniform misrepresentations "are appropriate subjects for class certification," pursuant to Moore v. PaineWebber, a 2002 decision of the 2nd Circuit. Here, the question of whether invoices materially misrepresented the amount owed to USF is a question common to all plaintiffs. "[T]he uniform nature of USF's alleged fraud and USF's concerted effort to shield its scheme," wrote the 2nd Circuit, "place each customer in the same position as to these issues." Questions of fact common to class members predominate over questions of individuals. "Despite the size of the class and the fact that it implicates the laws of multiple jurisdictions," wrote the 2nd Circuit, "the district court correctly concluded that both the RICO and contract claims are susceptible to generalized proof such that common issues will predominate over individual issues." The 2nd Circuit affirmed the decision of the District Court. Attorneys Ryan Phair, James Hartley, Richard Macon, Joe Whatley and Richard Wyatt represented the plaintiffs. Attorneys Glenn Kurtz and Douglas Baumstein represented the defendant.