This case was a class action filed on behalf of a nationwide class of consumers (our clients) who had leased automobiles from FELCO (Franklin Equity Auto Leasing Co.), an indirect subsidiary of the Japanese conglomerate Itochu Corp. The suit arose out of FELCO’s practices with respect to charging its lessees for property taxes. Pursuant to the customers’ leases, they were responsible for any property taxes incurred on their leased vehicles during the term of the lease. Plaintiffs alleged that during the term of the lease, FELCO would charge its customers the taxes as they were assessed by the taxing authority. Plaintiffs alleged that at the conclusion of a lease, FELCO would charge its customers an estimate of the property taxes that it expected would be (but were not yet) assessed on the vehicle for the final period of the lease. Plaintiffs alleged that nothing in the FELCO leases permitted FELCO to charge its lessees an estimate of taxes that were not yet due. Plaintiffs alleged that FELCO did not disclose to its customers that the amount charged for taxes at the termination of the lease was an estimate. Plaintiffs also alleged that FELCO did not refund any overcharges that resulted from those instances in which FELCO’s estimate exceeded the actual amount of the taxes that were later determined to be due with respect to the leased vehicles.
The United States District Court for the Southern District of Texas certified a nationwide RICO mail and wire fraud class for all FELCO lessees who had allegedly been overcharged in this manner. The certification of a RICO class in this case was unusual because reliance was an element of the underlying mail and wire fraud claims. The Fifth Circuit Court of Appeals has repeatedly rejected the certification of classes where reliance is an element of the underlying claim because of the need, in most instances, for individualized proof on this issue. In this case, Gibbs & Bruns was able to convince the district court that the individual class member’s act of paying the allegedly fraudulent invoices (which allegedly misrepresented that the taxes being charged were actually due and owing) was evidence of reliance that could be proved on a class-wide basis. The class certification ruling was appealed to the Fifth Circuit, and the case settled shortly thereafter. Pursuant to the terms of the settlement, FELCO agreed to pay each of the class members a sum equaling 85% of the alleged overcharge attributable to each class member. In addition, and without reducing the class members’ recoveries, FELCO agreed to pay the attorneys’ fees of class counsel. The settlement became final in June 2006, and payments were made to the class members in August 2006.