March 7, 2012

Differences in State Consumer Protection Laws Making Nationwide Class Certificates Less Likely

Seller Beware: Consumer Protection Insights for Industry

Last month we commented on a significant decision in the Ninth Circuit case Mazza v. American Honda Motor Co., which limited the circumstances in which California's consumer protection laws can apply to transactions in other states. Now, we're beginning to see how the Mazza decision affects bids for nationwide class certification.

A February 27, 2012 decision out of the Central District of California aptly demonstrates the difficulty post-Mazza plaintiffs face when arguing that California consumer protection laws should apply to nationwide classes. In this case -- Gianino, et al. v. Alacer Corp. -- plaintiffs allege that defendant Alacer Corp. ran afoul of California consumer protection law by falsely representing that its Emergen-C™ vitamin supplement drink mix benefits the immune system. Relying heavily on Mazza, the court rejected the plaintiffs' motion to certify a nationwide class.

The plaintiffs urged the court to adjudicate the claims of a nationwide class under California law. Alacer argued that choice of law rules required the court to apply each of the fifty states' laws, and further, that consumer protection laws of the fifty states are so divergent, that common questions of law would not predominate.

Applying the conflicts of law analysis set out in Mazza, the court reached the conclusion that Alacer urged. First, the court examined the differences between the consumer protection laws of the fifty states, and found them to be material. For example, many states' consumer protection laws have different injury, scienter, and reliance requirements from one another. Second, the court considered the foreign states' interests in applying their own laws. The court found these interests to be significant, noting that consumer protection laws reflect each state's balancing of the duty to protect consumers from injuries with the duty to shield businesses from unnecessary regulation or litigation. Finally, the court found that, while California has an interest in applying its own law to California transactions, it has little interest in applying its law to transactions in other states. Other states, however, have a strong interest in applying their own law to the consumer transactions that occur within their borders. Thus, the court held that the laws of each of the fifty states would have to apply to the case.

Given the differences in state consumer protection laws, the court found that common legal issues would not predominate, and thus class certification would be improper. Further, class litigation would not be superior to other available methods of resolving the controversy because "[t]he trial would devolve quickly into an unmanageable morass of divergent legal issues."

This decision demonstrates that Mazza has begun to take hold and that while California's consumer protection laws remain among the most plaintiff-friendly in the country, in the future, their application may often be limited to transactions within the Golden State. In response to this change, many plaintiffs have proposed statewide sub-classes in addition to nationwide classes, while others have filed separate statewide class actions. It remains to be seen whether such strategies will be an effective means of achieving class certification post-Mazza.

© 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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