Wednesday, November 03, 2010

Tabs protect Target from class action

Sevidal v. Target Corp., --- Cal.Rptr.3d ----, 2010 WL 4260891 (Cal.App. 4 Dist.)

Sevidal bought three pieces of clothing from Target’s website that were misidentified as made in the US and filed a putative California false advertising class action, alleging that he’d relied on the misstatement. He argued that, after Tobacco II, he didn’t need to show reliance by absent class members, and that his own patriotic commitments had induced his supposedly “Made in the USA” purchases. The court of appeals affirmed the trial court’s refusal to certify because the proposed class was not reasonably ascertainable through records or self-identification. The proposed class was also overbroad because the vast majority of absent class members never saw the web page containing the alleged misrepresentation.

Sevidal’s proposed class was any California consumer who purchased any product from on or after November 21, 2003 which was identified on as “Made in USA,” when such product was actually not manufactured or assembled in the United States. Target acknowledged that a “computer bug” inadvertently caused imported clothing to be displayed as “Made in US” at times, though allegedly not at others. Target discovered the problem in 2007, and by June 2008 it had implemented a code change that solved the problem.

Target argued that consumers could use its website to buy clothing without seeing country of origin information, if they clicked “add to cart” from a screen of search results that contained a list of products with thumbnails and brief descriptions. (How many people do this with clothing? Among other things, what size do they end up buying?) Or, they can choose to see the item details. But that screen still doesn’t state country of origin. Only if they choose to click on the “Additional Info” tab, one of four offered tabs, will they see the country of origin information. (Our country of origin disclosure rules were set up before the rise of the web browser. I wonder if we’d do it differently now—if this were a disclosure required because of affirmative statements about the product, that is, a disclosure required to avoid misleadingness, then hiding it behind a tab would be insufficient under standard FTC principles.) Target produced evidence from 2009 showing that the vast majority of browsers—80%--don’t click on “Additional Info” before buying and are thus never exposed to the country of origin information. And even those 20% may not have bought anything; the number of total clicks on the “Additional Info” tab was equal to only 17% of the total number of items purchased during that period.

The district court found that Sevidal failed to show an ascertainable class. Target lacked the records to show when items may have been mislabeled, and it couldn’t reasonably obtain the information from its host Amazon. Nor did Sevidal show predominance, because it was likely that less than 17% of the proposed class viewed the erroneous designations at issue and there’s no way to tell which ones they were. Tobacco II, by contrast, featured an extensive and long-term advertising campaign involving public health. Thus, the proposed class was also overbroad, because consumers might never have seen the false designation of origin.

The court of appeals agreed. The class representative has the burden to define an ascertainable class, describing the proposed class by specific and objective criteria. Ascertainability is important to giving adequate notice to class members and determining preclusion. Potential class members must be identifiable without unreasonable expense or time. This was impossible here because Target did not maintain, or have access to, records identifying the individuals who purchased a product with an erroneous country-of-origin designation. The evidence showed that the programming error did not consistently misidentify origin and sometimes affected the same item more than once, so items may have alternated between being correctly designated as imported and erroneously designated multiple times. Without knowing the exact dates and times of the false country of origin designation, Target couldn’t identify the affected consumers.

Sevidal argued that Target had, through discovery, identified specific products that had been mislabeled. However, Target was only able to determine what items were described as Made in the USA, not whether this was false, and it couldn’t determine who bought them when they were misidentified.

A class may be specific enough if its members can identify themselves as having a right to recover based on the description; Sevidal argued that was true here. But the proposed class included consumers who’d never looked at the Additional Info. By definition, they’d have no way of knowing they purchased when an item was misidentified, and 80% of the proposed class falls within this category. Just because Target can identify some consumers who purchased when the goods were misidentified doesn’t mean the class as a whole is ascertainable.

Sevidal contended that Target’s failure to keep records eliminated his burden to establish an ascertainable class. Prior cases applying this rule involved contractual or statutory duties to maintain records, and at worst created problems involving subclasses or later elimination of a small percentage of class members; the situation was different here.

In addition, the proposed class was overbroad because a substantial portion of the class would have no right to recover on the asserted legal claims. Though reliance isn’t required for absent class members, restitution is only available for money or property “which may have been acquired” by means of an unfair or unlawful practice. “Although this standard focuses on the defendant's conduct and is substantially less stringent than a reliance or ‘but for’ causation test, it is not meaningless.” As a result, the UCL and FAL require “some connection” between the defendant's improper conduct and the unnamed class members seeking restitution. People who could not possibly have been affected by the representations because they were not exposed to them are not covered. When there is “absolutely no likelihood” that proposed class members were deceived, they can’t be proper class members, and the class here was overbroad because this was true of so many people falling into the proposed class definition.

The court distinguished a case involving a nutritional supplement containing a controlled substance in which none of the class members had been informed the product contained this substance; the court of appeals reversed a refusal to certify. Here, however, there was no allegation that Target was legally required to inform consumers of the product origin information. Although Sevidal alleged that a false “Made in USA” representation violates a California statute, he didn’t show that retailers are legally required to inform consumers of the country of origin before purchase. (Under federal law, sellers must put country of origin information on clothing labels, and the FTC states that catalogs and other promotional materials, including internet ads, must disclose whether the clothing is made in the US or imported. But the relevant laws were written in the age of mail order, and I’m not entirely clear on the FTC’s basis for saying that disclosure is required on the internet unless the theory is that nondisclosure in ads is inherently misleading given the on-clothing disclosure requirements.)

Like the UCL/FAL class, the CLRA class was overbroad, because CLRA remedies require unnamed class members to have suffered some damage from an unlawful practice. Because the majority didn’t view the alleged misrepresentation, they couldn’t satisfy the causation element. Worse problems attended the fraudulent concealment claim, for which reliance is required.

No comments: