Monday, December 06, 2021

The class action continues to die by a thousand cuts: herein of splitting injunctive relief claims

Stout v. Grubhub Inc., 2021 WL 5758889, No. 21-cv-04745-EMC (N.D. Cal. Dec. 3, 2021)

Stout sued Grubhub over an allegedly false promise to provide “Unlimited Free Delivery” to Grubhub+ subscribers. Grubhub sought to enforce its arbitration agreement. Concluding that the complaint sought private injunctive relief in part and public injunctive relief in part, the court found the claim severable under the arbitration agreement, which had a severability clause. These contortions occur because of California’s rule that a right to public injunctive relief can’t be waived, whether by arbitration agreements or otherwise. So the private relief (the request not to charge Grubhub+ subscribers extra for delivery under any circumstance) has to be arbitrated, but not the pure claim “don’t advertise ‘Unlimited Free Delivery’ while actually sometimes charging for delivery.”

This split result occurred because the Ninth Circuit has narrowed the concept of “public injunctive relief” to only things that could in theory benefit anyone, not things that benefit a specific existing class of people (e.g., current Grubhub+ subscribers). I’m not entirely sure why that means a split result in this case, though—the court reasoned that anyone could become a Grubhub+ subscriber, and thus an injunction against falsely advertising the program benefits the public. But by the same logic, wouldn’t a ban on actually charging extra delivery fees to Grubhub+ subscribers in the future benefit the public, any one of whom could join Grubhub+?

This all stems from Hodges v. Comcast Cable Communications, LLC, 12 F.4th 1108 (9th Cir. 2021), which interpreted the California rule (from a case called McGill) as holding that public injunctive relief: (1) is usually future-directed, (2) does not require the class action mechanism, and (3) is distinguished from private injunctive relief, which provides benefits “to an individual plaintiff – or to a group of individuals similarly situated to the plaintiff,” by involving diffuse benefits to the “general public” as a whole. The paradigmatic example of public injunctive relief is an injunction against false advertising aimed at the general public.

Thus, injunctive relief that only benefits people who become customers is private injunctive relief (although injunctive relief that only benefits another subset of the public, such as those eligible for free tax filing services, is not). An order enjoining Grubhub “from continuing to engage, use, or employ [its] practice of misrepresenting [its] delivery fees.”

The court rejected plaintiff’s argument that there were two ways to address the false advertising—either to change the advertising or to make it true--so it was all public injunctive relief. “[T]he fact that the alleged underlying misconduct concerns false advertising does not mean that any requested injunctive relief affecting the accuracy of that advertising is automatically deemed public in nature,” since a court should consider “who primarily benefits from the injunctive relief requested and who is only incidentally benefited.”

I think the “primarily” consideration here is more understandable as being about forward-looking versus backwards-looking; otherwise the logic that false advertising, while targeted at the world at large, actually has a chance of harming only a subset of people should mean that both types of relief are “private.” Either form of relief would benefit the public, who are generally invited to join Grubhub+.

Still, even though Grubhub+ is only available to Grubhub account holders, “there is no indication that Grubhub+ is only advertised to existing Grubhub customers, as opposed to the broader public. Nor is there any showing that one must first be a Grubhub customer before buying a Grubhub+ subscription.” Thus, half of the case stays in federal court as seeking public injunctive relief.

However, the court noted, Stout might lack standing to pursue the “don’t charge the delivery fee” remedy, since he is no longer a Grubhub+ subscriber.  The arbitrator could decide on plaintiff’s standing to seek an end to the putative delivery charges.

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