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Cohen v. Blockbuster Entertainment

September 26, 2007

MARC COHEN, UWE STUECKRAD, MARC PERPER, AND DENITA SANDERS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLEES,
v.
BLOCKBUSTER ENTERTAINMENT, INC., INDIVIDUALLY AND ON BEHALF OF ALL ENTITIES DOING BUSINESS AS BLOCKBUSTER OR BLOCKBUSTER VIDEO, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County. No. 99 CH 2561 (cons. with 99 CH 8984) Honorable Paul Biebel, Judge Presiding.

The opinion of the court was delivered by: Justice Theis

Published opinion

Plaintiffs, Marc Cohen, Uwe Stueckarad, Marc Perper, and Denita Sanders, brought this national consumer class action lawsuit against defendant Blockbuster, Inc. seeking individual and class relief for certain customers who were charged improper and excessive fees. During the pendency of the case, the circuit court denied Blockbuster's motion to decertify the nationwide class, holding that Blockbuster was judicially estopped from challenging class certification where it had agreed to certification for settlement purposes with respect to another class involving similar litigation in Texas. Thereafter, the circuit court certified the following question for interlocutory appeal pursuant to Supreme Court Rule 308:

"Whether the circuit court abused its discretion when it imposed the equitable doctrine of judicial estoppel to bar Blockbuster from challenging certification of a national litigation class in Illinois where in thirteen separate instances Blockbuster both explicitly and implicitly agreed for settlement purposes that another class virtually identical to the one currently before it met all the requirements of a class action in Texas and achieved a settlement that bound the rights of 38.5 million to 40 million people." (Emphasis in original)

For the following reasons, we answer the certified question in the affirmative.

BACKGROUND

In February 1999, plaintiffs filed their original complaint against Blockbuster related to its extended viewing fees (EVFs), which were fees incurred when a customer elected to keep a rented video or DVD beyond the prepaid initial viewing period, and its unreturned video charges, which were imposed when a video or DVD was not returned or was damaged beyond repair (the Cohen case). Plaintiffs alleged that these fees constituted illegal penalties which arose from improper liquidated damages assessed against a customer for his breach of contract. It is undisputed that the breach of contract claims asserted therein were predicated solely upon the written Blockbuster membership agreements, which were form contracts. Plaintiffs asserted that these contracts were continually the same from 1996 until February 2000, and the terms and conditions of membership were not subject to negotiation between Blockbuster and its customers.

During the course of the Cohen litigation, several other similar state class-action lawsuits were pending against Blockbuster. On April 11, 2001, a Texas trial court entered an order preliminarily certifying a nationwide class for settlement purposes and preliminarily approving a settlement agreement in the case of Scott v. Blockbuster, No. D 162-535 (Jefferson County, Texas) (Scott). The court found that the prerequisites for class certification had been satisfied for settlement purposes only, and indicated that the certification of a settlement class was subject to further review. The Texas court additionally enjoined all other similar class actions pending against Blockbuster from proceeding until the Scott class action issues were finalized.

At the same time, the trial court in the Cohen case entered a counter-injunction and enjoined the Texas court form interfering with its oversight of the Cohen case. On April 23, 2001, the trial court in the Cohen case entered a provisional class certification order certifying two plaintiff classes - a "late fee" class and an "unreturned video" class.

Thereafter, on December 10 and 11, 2001, the Texas court held a fairness hearing in the Scott case for approval of class certification and settlement. At that hearing, plaintiffs' counsel in Scott urged that the requirements for certification were met. For example, they indicated that "[t]he terms and conditions of Blockbuster memberships are found only in the membership applications and nowhere else." Defense counsel for Blockbuster agreed for purposes of settlement that the elements were met. Nevertheless, counsel for Blockbuster made the following reservation with respect to the approval of the settlement class in Scott:

"Your honor, one thing to make clear. [Plaintiff's counsel] has continually advised the Court that that [sic] is a request to certify a settlement only class. Blockbuster is in agreement with the plaintiffs on that point. Nothing in that grievant [sic], however, constitutes a waiver of any objections we might have to any litigation class over these issues in this Court or any other court and the settlement agreement, I believe, incorporates this reservation and I just wanted to make that noted for the record."

On January 22, 2002, the Texas trial court entered its findings of fact and conclusions of law and also entered its final judgment approving the settlement agreement and determining that the settlement in Scott was fair, adequate, reasonable and in the best interests of the members of the settlement class.

The Scott settlement class included "all members of Blockbuster who incurred extended viewing fees or non-return fees between January 1, 1992 and April 1, 2001." The settlement further provided that all members of the Scott settlement class were barred from asserting any further claims against Blockbuster based on its EVF policies, even those incurred after April 1, 2001. The Texas court also identified those individuals whose claims would not be released by the settlement as follows: Blockbuster customers who were not included in the settlement class, including customers who opted out of the Scott settlement class, customers who joined Blockbuster after April 1, 2001, and customers who joined before April 1, 2001, but did not incur any EVFs before that date. Additionally, the settlement agreement provided in part as follows:

"Plaintiffs and Class Counsel agree that certification of the Settlement Class is for settlement purposes only, and further agree that the certification of the Settlement Class shall not be used to urge that a litigation class should be certified against Blockbuster in the event that this settlement is not finally approved for any reason. In the event this settlement is not approved, Blockbuster retains the right to object to the maintenance of this or any other action as a class action and to contest this or any other action on any other grounds."

The Scott case was considered by the Texas appellate court on several occasions. In Peters v. Blockbuster, Inc., 65 S.W.3d 295 (Tex. App. 2001), the Texas appellate court determined that the trial court did not abuse its discretion in certifying a settlement class, and later affirmed the settlement as fair in part and remanded it in part to address certain class members (not relevant to these proceedings) who were not given adequate consideration. See ...


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