January 16, 2012

Ninth Circuit Puts the Brakes on Nationwide Class of Auto Purchasers

Consumer Advertising Law Blog

A January 12, 2012 decision by the Ninth Circuit has established significant limits on the circumstances in which California's consumer protection laws can apply to transactions in other states. At the same time, the decision establishes a useful precedent for defendants who seek to block certification of nationwide classes of consumers under state consumer protection laws in any jurisdiction.

The Ninth Circuit case -- Mazza v. American Honda Motor Co. -- was brought by consumers from Florida and Maryland who purchased Acura RL cars equipped with the so-called Collision Mitigation Braking System (CMBS). The plaintiffs pointed to a product brochure, television commercials, magazine advertisements, Acura's own website and magazine, and the owner's manual, all of which, plaintiffs said, marketed CMBS's functionality in a misleading way. Even though the plaintiffs bought their cars in Florida and Maryland, they argued that the advertising, which was created in California, violated California's expansive and plaintiff-friendly consumer protection laws (the Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act). The district court certified a nationwide class of consumers who purchased or leased new or used Acura RL cars with CMBS, finding that the plaintiffs met their burden for class certification under Federal Rule of Civil Procedure 23.

A panel of the Ninth Circuit vacated the class in a 2-1 decision (Senior Judge Dorothy Nelson dissented), finding that the lower court misapplied the "predominance" prong of Rule 23(b)(3), which requires that the questions of law or fact common to class members predominate over any questions affecting only the individual members. As to the questions of law, the court ruled that each class member's consumer protection claim must be governed by the consumer protection laws of the jurisdiction in which the transaction took place, not only California. The court pointed to material conflicts between the consumer protection laws of California and other states (such as a scienter requirement of some state consumer protection laws but not others). Then, with sweeping language, the court explained why each state has an interest in having its own consumer protection laws apply to conduct within its borders:

More expansive consumer protection measures may mean more or greater commercial liability, which in turn may result in higher prices for consumers or a decrease in product availability. . . . As it is the various states of our union that may feel the impact of such effects, it is the policy makers within those states, within their legislatures and, at least in exception or occasional cases where there are gaps in legislations, within their state supreme courts, who are entitled to set the proper balance and boundaries between maintaining consumer protection, on the one hand, and encouraging an attractive business climate, on the other hand.

The Ninth Circuit further drew upon the principles of federalism underlying the enactment of the 2005 Class Action Fairness Act, and noted that, if California law were applied to the entire class, foreign states would be impaired in their ability to calibrate liability to foster commerce. As the court concluded, "[t]he district court's reasoning elevated all states' interests in consumer protection to a superordinate level, while ignoring or giving too little attention to each state's interest in promoting business." These words will no doubt be music to the ears of the defense bar.

Having concluded that common questions of law did not predominate, the Court turned to whether common issues of fact predominated. In this analysis, the Court pointed to the "fairly limited" nature of the CMBS advertising. This fell short of an "extensive and long-term" advertising campaign needed to establish a common questions of fact. Thus, the court concluded, even if the class was restricted only to those who purchased or leased their car in California, common issues of fact would not predominate because the class includes members who were not exposed to, and therefore could not have relied on, Honda's allegedly misleading advertisements.

There are two major takeaways from this decision. First, the conflict of law analysis represents a serious blow to the nationalization of California consumer protection laws. As this blog has noted before (e.g., here and here), California's laws allowing private damages suits over even the most minor or technical omissions have made it a breeding ground for consumer class action litigation. And plaintiffs' lawyers have worked hard to make those laws apply to consumer transactions in other states so long as the transaction has some arguable nexus to California. The Ninth Circuit's decision should greatly curtail that trend, as it found that California's consumer protection laws are not so far-reaching. Second, putative classes of consumers from multiple states will find it harder to have a single state's consumer protection law cover all of their claims, which, in turn, will make it harder for the consumers to get nationwide classes certified in any jurisdiction. Undoubtedly, Mazza will be cited by product liability defendants in class certification proceedings throughout the country.

As a final observation, we find it interesting how little a role the Supreme Court's decision last June in Wal-Mart v. Dukes played in the decision. It seems pretty clear the panel would have viewed Mazza the same way even before Wal-Mart. Indeed, the only significant place Wal-Mart was cited was where the majority distinguished it by saying the Mazza plaintiffs, unlike the Wal-Mart plaintiffs, satisfied Rule 23(a)(2)'s "commonality" requirement, which leads one to wonder whether the Ninth Circuit fully absorbed what Wal-Mart said about commonality. When Wal-Mart came down last summer, the conventional wisdom was that it was front-loading a predominance-like inquiry into "commonality." But Mazza -- just like another recent class action decision out of California that we recently wrote about -- seems to go on applying commonality in the same way that courts did before Wal-Mart.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.


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