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Ninth Circuit Concludes That Common Issues Do Not Predominate Where Retailer’s In-Store Signs and Oral Sales Statements Place Each Putative Class Member’s Exposure to Misleading Statements in Doubt




by:
Sascha Henry
John M. Landry
Sheppard, Mullin, Richter & Hampton LLP - Los Angeles Office

 
February 18, 2014

Previously published on February 13, 2014

In Berger v. Home Depot USA, Inc., Case No. 11-55592, 2014 U.S. App. LEXIS 2059 (9th Cir. Feb. 3, 2014), the Ninth Circuit Court of Appeals affirmed the denial of class certification based largely on evidence that the defendant’s point-of-sale signs and oral statements supplied allegedly withheld information. A proposed class lacks the requisite cohesion where additional information at the point-of-sale place each member’s exposure to the alleged misstatement in doubt.

When renting tools, Home Depot offers its customers a “damage waiver” pursuant to which the customer is not liable if he or she returns the tool damaged in exchange for a fee. The plaintiff brought a putative class action claiming that he was misled into purchasing the damage waiver because Home Depot failed to inform him that he could decline it. Although Home Depot did not deny that its computer systems’ default is to add the damage waiver’s cost to the rental price, it contended that it discloses the waiver’s optional nature to customers via rental contract language, in-store signs, and its sales employees.

The plaintiff moved to certify a class of persons who paid for waivers from July 2002 to the present. Because Home Depot had revised its rental contract and waiver-related language five times during this period, the plaintiff also proposed contract-specific subclasses. The U.S District Court for the Central District of California denied class certification on numerous grounds.

Separately considering each claim, the Ninth Circuit affirmed denial of class certification on the ground that the plaintiff did not satisfy Rule 23(b)(3)’s predominance requirement. Regarding the Unfair Competition Law claim, Cal. Bus. & Prof. Code §§17200 et seq., the Ninth Circuit reasoned that UCL claims do not qualify for class treatment when the proposed class includes persons who were not exposed to the alleged UCL violation. The proposed class period admittedly encompassed five different rental contracts. For the Ninth Circuit, this was enough to defeat predominance: “Each of the five contracts used by Home Depot requires an independent legal analysis to determine whether the language and design of that contract did or did not suffice to alert customers that the damage waiver was an optional purchase, and thereby did or did not expose that group of customers to a potentially misleading or deceptive statement.”

The Ninth Circuit also rejected the plaintiff’s proposed narrower, contract-specific subclasses. The plaintiff could only prosecute claims on behalf of the proposed subclass covering the period of his own purchase. Yet, even as to this subclass, the parties contested whether Home Depot informed customers of the optional nature of the damage waiver by in-store signs or oral statements by Home Depot employees. The Ninth Circuit deemed the in-store signs, which would have “var[ied] over time and among the different Home Depot locations,” a “crucial issue” requiring individualized determinations. And, “any oral notice given by Home Depot employees about the optional nature of the damage waiver during a particular rental transaction would necessarily be a unique occurrence . . . . requir[ing] each individual consumer to show that he or she had personally been exposed to misleading information.”

The Ninth Circuit’s analysis of the Consumer Legal Remedies Act, Cal. Civ. Code § 1291 et seq., and common law claims proceeded along the same lines. Although the CLRA requires reliance and actual injury, an inference of class-wide reliance may arise when alleged misstatements are material. But the relevant issue was whether Home Depot had “actually made” any allegedly misleading statement. Because the common law claims required proof that Home Depot unjustly received waiver-related funds, the relevant question remained whether Home Depot disclosed the waiver’s optional nature to its customers. This required the same individualized inquiries as the UCL claim.

The Ninth Circuit’s opinion confirms that consumer claims based on an allegedly incomplete, misleading statement resist class treatment when other point-of-sale information is available to the consumer. The Ninth Circuit’s opinion recognizes that retailers communicate with their customers in different ways.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Sascha Henry
John M. Landry
Practice Area
 
Class Actions
 
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