Wednesday, November 28, 2012

Routine California class certification highlights power of presuming reliance

Here, the California class is certified but the Pennsylvania class isn't, a stark reminder of how differently California courts treat material omissions in advertising:

Beck-Ellman v. Kaz USA, Inc., 283 F.R.D. 558 (S.D. Cal. 2012)

Plaintiffs moved for class certification of their claims of false advertising of Kaz heating pads, and the court granted the motion in part and denied it in part. Plaintiffs alleged that the pads contained known defects limiting their utility and creating dangers, but that Kaz failed to disclose these defects. About 5 million units were sold over eight years, over half of them in Pennsylvania and California. California plaintiff Beck-Ellman alleged that she bought a pad in late 2007 that injured her in early 2008. The Pennsylvania plaintiffs (Mahoy) alleged that they bought one in 2010, which injured one of them and broke in the process.

Beck-Ellman alleged violation of the UCL, FAL, CLRA, breach of warranty, and unjust enrichment. Mahoy alleged violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, breach of warranty, and unjust enrichment. They proposed certifying a California class and a Pennsylvania class, excluding anyone seeking damages for personal injury or property damage caused by the pads.

Numerosity was no problem. Kaz argued that differences in heating pads prevented commonality. But plaintiffs alleged that the ads for substantially uniform products were deceptive for a common reason. Differences in size, shape, number of heat settings, and washability of the pads didn’t matter if the ads/packages all contained the same material omissions, which was sufficient to create common issues among the class.

As for typicality, plaintiffs benefited by excluding personal injury claims; Beck-Ellman was typical of the class for purposes of the advertising related claims. Kaz argued, again, that the pads came in different versions and were bought in different places, online and in brick-and-mortar stores (how many stores are actually brick-and-mortar, I wonder?). But the omissions, and the pads, were sufficiently similar at this stage. Alleged differences in the applicability of the statute of limitations also didn’t defeat typicality. Kaz argued that Beck-Ellman was inadequate because she wasn’t bringing claims for personal injury or property damage, but it couldn’t claim she was inadequate for declining to assert a theory that could unravel the putative class. Any class member seeking recovery for such injury could opt out and sue.

The court therefore turned to the requirements of Rule 23(b)(3), which looks at predominance and superiority. Beck-Ellman’s consumer protection claims satisfied the predominance requirement, since they focused on Kaz’s alleged deceptive conduct across all the products. Individual reliance didn’t defeat predominance, because California looks at the reasonable consumer’s reaction, not the particular consumer’s; relief is available without individualized proof of deception, reliance, and injury. She’d also shown materiality for purposes of class certification, and because the omission was on the package, it was part of a common advertising scheme to which the entire class was exposed. The court likewise found common issues to predominate on her claims for unjust enrichment and breach of the implied warranty of merchantability, for similar reasons.

Damages, while invariably individualized, didn’t defeat class action treatment. Kaz had sales data that could be used to determine damages or restitution, and Beck-Ellman sought no unique remedy. Likewise, potential differences in the statute of limitations didn’t defeat predominance, given an otherwise sufficient nucleus of common questions. Statute of limitations issues could best be resolved at the merits stage, at which Kaz would be free to move for summary judgment. The court also found superiority, given the small individual sums at stake.

The outcome was different for the Pennsylvania class, since the court found that Pennsylvania consumer protection law requires proof of justifiable reliance, and that would apply to each plaintiff without a presumption of reliance from materiality. Though some cases suggested that Pennsylvania sometimes presumes reliance, the Third Circuit has stuck to an individualized proof standard and the court here agreed.

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