Ninth Circuit: 12(b)(6) Not the Time to Decide Whether a Business Practice Was Misleading

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In a brief memorandum opinion issued Friday, the Ninth Circuit issued a reminder that whether a business practice is misleading under California’s consumer protection statutes is typically a question of fact better deferred until later in the litigation.

In McMahon v. Take-Two Interactive Software, Inc., plaintiffs brought suit after purchasing the Grand Theft Auto V video game.  Plaintiffs alleged that the game was marketed in a fashion that misleadingly marketed the game’s online component.  The district court concluded as a matter of law that the alleged misrepresentations were not actionable under the UCL or the FAL.

The Ninth Circuit reversed, explaining:

plaintiffs alleged that they read all the disclosures and statements on GTA V’s packaging, and that these representations led them to believe that GTA Online would be available to play immediately upon purchase of GTA V. Contrary to these representations, GTA Online was not available immediately to any purchasers. The district court erred by failing to construe plaintiffs’ allegations that these representations were misleading in the light most favorable to plaintiffs, and by making the finding that the representations were not misleading. See Lilly v. ConAgra Foods, Inc., 743 F.3d 662, 665 (9th Cir. 2014) (“Whether a business practice is deceptive will usually be a question of fact not appropriate for decision on [a motion to dismiss].” (quotation marks and citation omitted)).

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Named Plaintiff’s Standing to Sue Over Products Not Purchased — Best Deferred to Class Cert Stage

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As noted in a recent post, defendants in proposed class action suits commonly argue that the named plaintiff only has standing to represent those who purchased the very same product that the plaintiff bought.  This argument appeared again in Reid v. GMC Skin Care USA Inc., 2016 WL 403497 (N.D.N.Y. Jan. 15, 2016), with the defendant arguing that plaintiffs lacked both Article III and class standing to assert claims in connection with products they didn’t buy.  

In Reid, the court concluded that because the plaintiffs had sufficiently alleged standing, individually, with respect to the product that plaintiffs did purchase, Article III standing was satisfied and dismissal was inappropriate.  The court held that whether plaintiffs could pursue claims based on other products amounted to a question of class standing, which was better “addressed at the class certification stage.”  Reid, 2016 WL 403497, at *3-4.… Read more

Wisconsin District Court Analyzing Restitution Under California Law

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In an earlier post, we wrote about the Ninth Circuit’s Pulaski decision, which analyzed restitution under California law among other topics.  A new and thorough opinion from U.S. District Judge J.P. Stadtmueller in Le v. Kohls Dept. Stores, Inc., No. 15-cv-1171 (E.D. Wi. Feb. 8, 2016), expands further on those principles.

The Le case arises from allegations that Kohls Department Stores engages in a continuous marketing campaign that falsely advertises that its products are sold at far higher priced by other merchants.  Mr. Le sought restitution under California’s CLRA and UCL statutes and sought to enjoin the misleading advertising going forward.

Kohls moved to dismiss the restitution claim on the grounds “that the only legally cognizable method of calculating Le’s restitution is through the price-to-value method,” which requires showing the delta between price paid and value received.  Le responded that while it was premature at the pleading stage to sayprecisely how restitution should be calculated, other options existed — full restitution, partial restitution based on the false “transaction value” promised by Kohls, or restitution tied to Kohls’ profits from the scheme. The court agreed:

the Court agrees with Le’s interpretation of California law, namely, that restitutionary relief under the UCL and CLRA is not strictly and categorically confined to the price-to-value method as proffered by Kohls.

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23(c)(4) Certification Granted in Costco Hepatitis A Lawsuit

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Judge David O. Carter of the Central District of California recently certified a liability-only class in a case alleging defendants’ conduct created a “risk of exposure to the hepatitis A virus” through the sale of defective food products. See Petersen v. Costco Wholesale Co., 2016 WL 304299 (C.D. Cal. Jan. 25, 2016).

Ruling on the existence and predominance of common questions, the court explained:

Given that Plaintiffs allege that a single product sold only at Costco was defective, there is a common core of salient facts. See Valentino v. Carter-Wallace, Inc., 97 F. 3d 1227, 1229 (9th Cir. 1996).

Thus, the court overruled defendants’ arguments that proving the existence of a defect on a classwide basis would be impossible:

The Ninth Circuit, however, has made clear that “proof of the manifestation of a defect is not a prerequisite to class certification.”  Baker v. Microsoft Corp., 797 F.3d 607, 611 (9th Cir. 2015) (citation omitted).

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Indeed, there are several significant common issues here, including Plaintiffs’ contention that a single, specific lot of allegedly defective organic pomegranate seed has given rise to Plaintiffs’ claims. … Put differently, determining whether Defendants sold a defective product in this case will not require a searching individualized inquiry; rather, there will be significant common proof at issue in resolving Defendants’ liability.

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Superiority Not Defeated Just Because More Money Was Theoretically Available in Non-Class Proceedings

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In Corvello v. Wells Fargo Bank, N.A., No. 10-cv-5072 (N.D. Cal.), the defendant contested class certification by arguing that class treatment would not be the superior form of adjudication.

Wells Fargo argued that whereas the FDCPA sets a $500,000 limit on statutory damages in class actions, class members could obtain up to $1,000 each in statutory damages if they proceeded individually.  In other words, absent class members would be better off without the class action device — they should file individual cases and claim their thousand dollars.

Judge Chhabria rejected the argument.  First, he noted that the statutory damages were not the sole source of damages available; class members may also be able to recover actual damages or restitution.  He went on to debunk the assumption that affected individuals would do better without the class device:

Moreover, even with respect to statutory damages, Wells Fargo appears to assume that every borrower who pursued [his or her] claim would be able to recover the maximum amount of statutory damages (namely, $1,000).  But the maximum statutory damages award of $1,000 is not automatic.  Instead, the amount of statutory damages (if any) depends on a court’s analysis of many factors.  Individual class members would not be sacrificing an automatic higher award of statutory damages, but the opportunity to argue for one on a case-by-case basis.

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Court Certifies Liability-Only Class in Costco Frozen Berry Class Action

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Three years after Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), lower courts continue to certify classes for liability purposes only, thereby reserving consideration of damages for individual determination during subsequent phases of litigation. These courts reason that Comcast’s predominance and superiority concerns are “largely irrelevant” to this approach, which is permitted by Rule 23(c)(4). E.g., In re Deepwater Horizon, 739 F.3d 790, 817 (5th Cir. 2014); Butler v. Sears, Roebuck and Co., 727 F.3d 796, 800 (7th Cir. 2013).

A recent order granting class certification in Peterson v. Costco Wholesale Co., Inc., 2016 WL 304299 (C.D. Cal. Jan. 26, 2016), exemplifies the trend. Following a Hepatitis A outbreak in the western United States “linked to the consumption of Townsend berry mix sold to consumers at various Costco locations in early 2013,” id. at *1, individuals from nine different states filed a class action in California state court, seeking damages in part on strict liability theories. The case was then removed to federal district court, where it was assigned to Judge David O. Carter.

At the class certification stage, the Court inquired whether the use of subclasses can account for variations in state law, and whether individual inquiries, such as differences in emotional distress damages, impact the Court’s predominance inquiry.… Read more

Automotive Class Action Not Restricted to the Specific Vehicle Model Owned by Plaintiff

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In Bedi v. BMW of N. Am., LLC, 2016 WL 324950 (D.N.J. Jan. 27, 2016), the court was presented with an increasingly common issue:  BMW argued that the named plaintiff only has standing to represent those members of the class who purchased the very same vehicle model as he did.  The court disagreed:

In this district, a class complaint generally may survive a motion to dismiss on products a lead plaintiff did not purchase, so long as: (1) the basis for each of the claims is the same, (2) the products are closely related, and (3) the defendants are the same. Eberhart v. LG Elecs. USA, Inc., No. CV 15-1761, 2015 WL 9581752, at *3 (D.N.J. Dec. 30, 2015); In re L’Oreal Wrinkle CreamMktg. & Sales Practices Litig., No. 12-03571, 2013 WL 6450701, at *4 (D.N.J. Dec. 9, 2013); Burke v. Weight Watchers Int’l, Inc., No. 12-6742, 2013 WL 5701489, at *3-4 (D.N.J. Oct. 17, 2013); Stewart v. Smart Balance, Inc., No. 11-6174, 2012 WL 4168584, at *16 (D.N.J. June 26, 2012).
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The alleged misrepresentation in this case is identical across all BMW vehicles included in the class: the use of “TwinPower Turbo” to describe single turbocharger engines.
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U.S. Supreme Court to Consider Appellate Jurisdiction to Review Denial of Class Cert After Named Plaintiffs Voluntarily Dismiss Suit With Prejudice

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In an earlier post, we flagged a cert petition filed in the U.S. Supreme Court by Microsoft Corporation, asking whether federal courts of appeals have jurisdiction to review a denial of class certification after the named plaintiff voluntarily dismisses his individual claims with prejudice. The issue arises in long-running litigation brought by consumers who purchased Xbox consoles which allegedly damage discs during use.

The Supreme Court has now granted review. Interestingly, it has rewritten the question presented, presumably to make clear that it wants argument on whether there is Article III jurisdiction and statutory jurisdiction under 28 U.S.C. § 1291. As rephrased by the Court, the question now is: “Whether a federal court of appeals has jurisdiction under both Article III and 28 U. S. C. §1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.”

Now that the Court has taken this case, it is worth observing that any victory by Microsoft would be pyrrhic. Because a class was not certified by the district court, but should have been according to the Ninth Circuit; and because the voluntary dismissal with prejudice binds only the named individuals in the Baker case, other consumers could simply file another class action seeking redress for the same consumer harm.… Read more