District Court Conflict Over Campbell-Ewald “Pick Off” Attempts

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It has been about five months since the Supreme Court decided in Campbell-Ewald that unaccepted Rule 68 offers to proposed class representatives do not give rise to mootness.  As soon as that opinion issued, readers noted the question the decision expressly chose not to answer:

We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff ’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.

As two recent opinions demonstrate, courts continue to grapple with the Supreme Court’s unanswered question.

In the first, Demmler v. ACH Food Companies, Judge Sorokin of the District of Massachusetts held that the distinction between an unaccepted Rule 68 offer, on the one hand, and a check sent without any preconditions, on the other hand, “makes all the difference.”  The court concluded it could not offer “any more relief” than what defendant had already tendered, and concluded both the individual and proposed class claims were moot.

In stark contrast, the Campbell-Ewald litigation has returned to the district court, where the defendant promptly paid $10,000 (in two separate ways) to the plaintiff, in an attempt to squeeze through the “opening” left by the Supreme Court.  … Read more

Sixth Circuit Interprets Campbell-Ewald

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The Sixth Circuit Court of Appeals recently became the latest circuit court to interpret the Supreme Court’s Campbell-Ewald opinion.  Campbell-Ewald, as most practitioners know by now, dealt with a defendant’s attempt to moot a proposed class action by making a Rule 68 offer of judgment to the class representative.

In Wilson v. Gordon, the Sixth Circuit reexamined its “picking off” exception to the mootness doctrine.  The court recounted how, dating back to even before the Supreme Court’s 1980 decision in Deposit Guaranty National Bank v. Roper, it has recognized that “the concern that the defendant … might strategically seek to avoid” class certification by offering to pay off the named plaintiff justifies an exception to the mootness doctrine.

Since Roper, we have recognized this line of reasoning under analogous circumstances. In Carroll v. United Compucred Collections, Inc., we held that a class action was not moot even though the named plaintiffs had been tendered a Rule 68 offer of judgment because a motion for class certification was then pending.

Turning to Campbell-Ewald, the court noted that while the “Supreme Court recently had the opportunity to address the ‘picking off’ exception … [t]he Supreme Court … grounded its holding in ‘basic principles of contract law’ instead.”  The court nevertheless noted that

Though Campbell–Ewald sheds little light on the “picking off” exception, the Court did observe that allowing an unaccepted offer to moot a case would place defendants like Campbell–Ewald “in the driver’s seat,” enabling them to avoid significant class-based liability.  

… Read more

CFPB Rule Would Give Consumers Their Day In Court

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As has been widely reported, the Consumer Financial Protection Bureau is soliciting public comment on whether to establish regulations concerning arbitration agreements for consumer financial products and services. The formal comment period closes on August 22, 2016, and you can comment by following this link.

The proposed rule would accomplish two things. First, it would prohibit the consumer finance industry from using arbitration agreements which block class action lawsuits and force consumers to seek relief on an individual basis in arbitration. Second, it would require the consumer finance industry to turn over arbitral records to the CFPB.

The proposed rule is without question in the best interests of consumers. The consumer finance industry has used arbitration agreements to block consumers from banding together to obtain relief in court. This has effectively given the industry a “free pass”; as the CFPB notes, “companies can sidestep the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm countless consumers.”

The CFPB’s comprehensive study on the use of arbitration agreements for financial products and services fully supports this rule-making. The study found that very few consumers even seek relief through arbitration, and those who do rarely receive any recovery.… Read more

How District Courts Are Interpreting Campbell-Ewald

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Earlier this year, the Supreme Court issued its opinion in Campbell-Ewald v. Gomez, and held that an unaccepted Rule 68 offer does not moot putative class action claims. Almost immediately afterward, the lower courts began grappling with the question the SCOTUS expressly held open: whether a furnished payment (as opposed to a mere offer) could suffice to moot putative class claims.  Most recently, we wrote about the Ninth Circuit’s ruling in Chen v. Allstate, in which the Ninth Circuit held that a furnished payment did not have the effect of mooting the claims in that case.

How have the district courts ruled on the issue outside the Ninth Circuit?  Most recently, Judge Elaine E. Bucklo of the Northern District of Illinois opted to follow the Ninth Circuit’s ruling, holding:

I agree with the Ninth Circuit and the several district courts that have concluded that the Campbell–Ewald Court’s admonition that “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted,” id. means that it is inappropriate to enter judgment on a named plaintiff’s individual claims, “over the plaintiff’s objection, before the plaintiff has had a fair opportunity to move for class certification.”

Fauley v.… Read more

11th Circuit: Comcast Doesn’t Require Classwide Proof of Damages

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Today, in Carriuolo v. General Motors Co., the Eleventh Circuit joined a group of circuits that includes at least the Second, Third, Seventh, and Ninth, holding that “individual damages calculations alone cannot defeat class certification.” The court rejected defendant’s argument that, after the Supreme Court’s Comcast v. Behrend decision, “damages must be capable of measurement on a classwide basis.”

The underlying case involves allegations that GM advertised that some of its vehicles had achieved safety ratings that they hadn’t really achieved.  Plaintiffs alleged this conduct violates Florida’s deceptive practices statute.  Based on that theory of liability, the Eleventh Circuit held that damages would be a common issue, since individual buying preferences would not alter the overall market price::

a manufacturer’s misrepresentation may allow it to command a price premium and to overcharge customers systematically. Even if an individual class member subjectively valued the vehicle equally with or without the accurate Monroney sticker, she could have suffered a loss in negotiating leverage if a vehicle with perfect safety ratings is worth more on the open market. … Obviously, prices are determined in substantial measure according to market demand. Thus, because a vehicle with three perfect safety ratings may be able to attract greater market demand than a vehicle with no safety ratings, the misleading sticker arguably was the direct cause of actual damages for the certified class even if members individually value safety ratings differently.

… Read more

Deadline for Filing a Song Bev Implied Warranty Claim?

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Dating back to 2009, when the California Court of Appeal decided Mexia v. Rinker Boat Co., there has been a debate about when Song Beverly implied warranty claims must be brought by. Within a year of sale? Within four years? Or later?

The text of the statute can be read to suggest one year: it states that the duration of an implied warranty can last no “more than one year following the sale.” Cal. Civ. Code § 1791.1(c). But Mexia held that with “a latent defect, a product is rendered unmerchantable, and the warranty of merchantability is breached, by the existence of the unseen defect, not by its subsequent discovery.” 95 Cal. Rptr. 3d at 291. Last December, the Ninth Circuit in Daniel v. Ford Motor Co., held that despite the post-Mexia uncertainty of the past 6 years, “there is not convincing evidence that the California Supreme Court would decide the latent defect discovery issue that was presented in Mexia differently.” As a result, the defect need not manifest, and the implied warranty claim need not be brought, within one year of the sale.

The new question, then, is whether there is any deadline for a Song Beverly implied warranty claim.  … Read more

Ninth Circuit Agrees to Hear Appeal of HP Certification Ruling

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In an earlier post, we wrote about Judge Hamilton’s decision certifying a class in Karim v. Hewlett-Packard.  The decision spoke to the level of exposure class members need to have to representations that allegedly formed the basis of the bargain for an express warranty.

Update: the Ninth Circuit has granted a Rule 23(f) petition and will consider the decision on appeal.  Judges Canby and Leavy granted the petition.  The caption at the Ninth Circuit is Karim v. Hewlett-Packard Co., No. 16-80000.… Read more

Cal. Court of Appeal Declines to Enforce Online Arbitration Clause

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A few weeks ago, we wrote about the Seventh Circuit’s decision in Sgouros v. TransUnion Corp., declining to compel arbitration because the defendant’s website failed to clearly inform users that they were agreeing to arbitrate their claims.

Around the same time, the California Court of Appeal issued a published opinion reaching a similar conclusion in Long v. Provide Commerce, Inc.  The defendant’s website allows consumers to purchase flower arrangements.  At the bottom of the webpage is a “Terms of Use,” which is viewable via a hyperlink.  Within the Terms of Use was a binding arbitration clause.

The Court of Appeal distinguished “browsewrap” agreements from “clickwrap” agreements, in that “browsewrap agreements do not require users to affirmatively click a button to confirm their assent to the agreement’s terms; instead, a user’s assent is inferred from his or her use of the website.”

Based on the layout of the defendant’s website, the trial court concluded that the Terms of Use hyperlinks were too inconspicuous to impose constructive knowledge on the plaintiff.  The Court of Appeal affirmed, concluding that “the hyperlinks and the overall design of the ProFlowers.com website would not have put a reasonably prudent Internet user on notice of Provide’s Terms of Use, and Plaintiff therefore did not unambiguously assent to the subject arbitration provision simply by placing an order on ProFlowers.com.”
 ***… Read more

Seventh Circuit Approves Class Settlement Over Objections

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Last month, the Seventh Circuit affirmed the final approval of a class settlement that provided both consumer and personal injury remedies.  The objector raised a host of issues and the full opinion is worth reading.  But two points in particular are likely to be informative for future consumer class settlements.

First, the court rejected the argument that variations among state law meant that certification was improper under Rule 23(b)(3).  The court began by reviewing Bridgestone/Firestone and Pella, and explained that it deemed this case to be more like Pella, where the court had found nationwide certification to be appropriate despite such variations.  The court continued:

but there is a stronger reason for supporting the district court’s decision here: the settlement agreement contained a choice‐of‐law clause, which specified the law of Illinois. Martin seems to have overlooked this point, when she asks in her brief, “will variations in claimants’ respective state laws be considered in determining the award?” The short answer is that those variations will not make a difference, because of the choice of a single law.

Second, the court also dealt with the fact that the settlement provided more money, and imposed greater claims burdens, for class members who alleged they had been injured:

As for the general claim that the procedures are too burdensome, we have no reason to disagree with the district court’s assessment to the contrary.

… Read more

Class Certification Granted in Automotive Defect Suit

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Judge Dean D. Pregerson certified the class under Rule 23(b)(3) in a suit alleging an undisclosed defect in certain Nissan vehicles.  The court certified California consumer protection and implied warranty claims, a Washington consumer protection claim, and a claim for common law fraud.  The case is Falco v. Nissan N. Am. Inc., 2016 WL 1327474 (C.D. Cal. Apr. 5, 2016).

Several times, the court relied on the ample Ninth Circuit precedent for certifying automotive defect cases:

The Court finds this case raises similar common questions of fact and law to the common questions alleged in another consumer automobile defect class certification case, Chamberlan v. Ford Motor Co., 402 F.3d 952, 962 (9th Cir. 2005). … In these consumer defect cases, commonality can be found in the very legal and factual question of the defect. See, e.g., id.; see also Wolin v. Jaguar Land Rover N. Am. LLC, 617 F.3d 1168, 1172 (9th Cir. 2010); Doyle v. Chrysler Grp. LLC, No. SACV 13-00620, 2014 WL 7690155, at *6-7 (C.D. Cal. Oct. 9, 2014); Parkinson v. Hyundai Motor Am., 258 F.R.D. 580, 595-96 (C.D. Cal. 2008).

The court also approved Plaintiffs’ two closely-related damages methodologies.  First, class members who already spent money on repairs and diagnoses can be provided restitution based on “the average cost of repair.”  Second, class members who had not already paid for repairs could still receive restitution based on the same figure because

the class would be getting the benefit of their bargain because they would be put in the same position they would have been had the car not been sold with the defective timing chain system — it is the cost necessary to make the vehicles conform to the value Plaintiffs thought they were getting in the price tendered.

… Read more