In Red Barn Motors, Inc. v. Nextgear Capital, Inc., No. 18-1409, 2019 U.S. App. LEXIS 4303 (7th Cir. Feb. 13, 2019), the Court of Appeals for the Seventh Circuit remanded for further proceedings the District Court’s de-certification of a class action against a Floorplan Lender.  We previously reported on the District Court’s opinion here:

The facts were as follows:

The defendant-appellee, NextGear Capital, Inc., formerly known as Dealer Services Corporation, provided lines of credit for financing the operations of used car dealerships. The plaintiffs Red Barn Motors, Inc., Platinum Motors, Inc. and Mattingly Auto [*2]  Sales, Inc., operated used car dealerships, and were solicited by NextGear to enter into a contract called a Demand Promissory Note and Security Agreement (the “Agreement”), whereby NextGear would issue a line of credit for them to access in purchasing used vehicles at automobile auctions. Those agreements provided the plaintiffs with a revolving line of credit, called a floorplan agreement, to purchase vehicles at the auction which they subsequently would sell at their dealerships. In the typical auction and financing transaction, a new car dealer provides a trade-in vehicle to an auction company, which presents the vehicle to used car dealers at an auction. If a used car dealer’s bid is accepted, that dealer takes possession of the vehicle. The dealer then either pays the auction company directly or utilizes an automotive financing company such as NextGear, which pays the auction company and provides financing by means of the floorplan agreement to the dealer for repayment. The auction company forwards the title to the entity that paid for the vehicle—either the used car dealer or the financing company. According to the plaintiffs, NextGear deviated from that sequence. It did not [*3]  pay the auction house at the time that possession was delivered, instead paying only after it received the title to the vehicles purchased. Although it could take as long as eight weeks for NextGear to receive that title and pay the money to the auction company, NextGear nevertheless charged interest and curtailment fees to the plaintiffs from the date of the initial purchase. The plaintiffs brought this action challenging that imposition of interest fees during the period prior to the receipt of title, when NextGear was not yet paying any funds to the auction house. They sought class certification to pursue that challenge on behalf of all other dealers who were subject to the same Agreement with NextGear and were charged such interest.

The Court of Appeals held that the District Court’s conclusions about such things as commonality were not sufficient to sustain the District Court’s conclusion to de-certify the class.

Nor does the reference to its Order on Motions for Summary Judgment lend any insight. In that Order, the district court held that the floorplan contracts were ambiguous as to when interest could begin to accrue, which required consideration of extrinsic evidence. The court noted that the parties had designated evidence suggesting that various party representatives had conversations about NextGear’s interest practices after the contracts were executed, but that evidence did not establish an undisputed factual basis supporting either sides’ position as to the interpretation of the contract or the parties’ intent. Accordingly, the court deemed the matter inappropriate for summary judgment. Those holdings are insufficient to sustain the court’s assumption that commonality and predominance were lacking. Neither the categorization of the contract as ambiguous, nor the prospect of extrinsic evidence, necessarily imperils class status. All parties concede that the floorplan contract in this case is a standard form contract. And neither the plaintiffs nor the defendants argue that the language in the contract has different meaning for different signatories; instead, all argue for an interpretation that would apply to all signatories of the contract. In fact, with a form contract such as this one, uniform application and interpretation of the clauses would be expected absent evidence that the form contracts in fact had a meaning that varied from one signatory to another. Even if the determination that the language is ambiguous as to when interest could accrue opens the door to extrinsic evidence to ascertain the intended meaning of that provision, the determination of its meaning would apply to all signatories and therefore would be capable of class-wide resolution. In fact, the court discussed that possibility in its initial determination to certify the class. In analyzing the commonality factor, the district court addressed the defendants’ argument that certain questions, such as “whether NextGear made any representations to any putative class members about when interest would begin to accrue … must be proven separately as to each dealer, and thus, the answers can only be determined on an individual, not a classwide, basis.” Dist. Ct. Entry on Plaintiffs’ Motion for Class Certification (06/29/2017) at 16. The court rejected that argument. . . .Therefore, when presented with the same issue in its initial class certification decision—the ambiguity as to when interest would accrue—the court concluded that the ambiguity did not prevent class certification because it was capable of a common answer. The court has not explained why a different conclusion to that question was reached in the Motion for Reconsideration, instead mentioning only the need for extrinsic evidence. But the mere need for extrinsic evidence does not in itself render a case an improper vehicle for class litigation. We have considered numerous cases in which the testimony of individuals would be necessary to establish the meaning or existence of a policy, and the prospect of such individual testimony did not render class status improper. . . . The proper focus for commonality is whether determination of the question will yield common answers that could resolve the litigation. Wal-Mart, 564 U.S. at 349-50. Here, the class was already narrowed to those who signed the specific form contract at issue here. With such a form contract, almost universally signed without negotiation or modification, there is no reason to think that the interpretation of the provision will vary from one signatory to another, and therefore the issue is one that is capable of a common answer and for which that common question predominates over questions affecting individual class members. The district court, to conclude otherwise, would have to identify why that extrinsic evidence would lead to another conclusion. But here, although the case was nearing the trial date, we have no indication as to what evidence the court believed would render class certification improper. See Bell, 800 F.3d at 377, quoting Szabo v. Bridgeport Machs, Inc., 249 F.3d 672, 676 (7th Cir. 2001) (“[i]f there are material factual disputes that bear on the requirements for class certification, the court must ‘receive evidence if only by affidavit and resolve [*13]  the disputes before deciding whether to certify the class.'”)(emphasis omitted). Absent a more thorough explanation of its reasoning, we cannot uphold the decision decertifying the class.