Tuesday, August 23, 2011

Ninth Circuit Reverses Denial of UCL Certification in Deceptive Online Coupon Scheme: Stearns v. Ticketmaster Corp.

On August 22, 2011, the Ninth Circuit issued an opinion in Stearns v. Ticketmaster Corp., 2011 U.S. App. LEXIS 17454, 4-5 (9th Cir. Cal. Aug. 22, 2011), reversing a district court’s denial of certification of the plaintiffs' claim under the UCL. The practice at issue pertained to consumers – subsequent to making an online Ticketmaster purchase – allegedly being signed up for a third party service through a standardized money-back coupon scheme which imposed a reoccurring monthly service charge without the purchaser’s knowledge or consent. As acknowledged by the Court, this type of business practice poses a unique “reliance” scenario capable of fragmenting a proposed class, as the alleged deception is one based on a complete omission which potentially engenders no affirmative reliance whatsoever with regard to the subsequent reoccurring charge:
The gravamen of Appellants' claims is that the Appellees’ website presentations and practices are designed to lull and induce people, who really only intended to purchase tickets from Ticketmaster, into inadvertently becoming committed to purchasing EPI's services, which they neither expected, nor wanted, nor used, and that EPI then proceeds to mulct them with continuing charges. EPI even goes so far as to make charges to their credit cards, or take money directly from their bank accounts, all without specific authorization. And EPI does not issue a confirmation at the end of the internet transaction to memorialize the fact that a deal has been consummated.
See Stearns, 2011 U.S. App. LEXIS 17454, at 4-5.

Because class members generally will have no idea how they were signed up for the service under this type of practice, it is only reasonable that a defendant will seek to defeat certification by eliciting a wide array of potential factual scenarios from class members as to how they believe the subscription came to be, wreaking havoc on framing a certifiable class. This was an apparent issue in this case, as the Court upheld the district court’s finding that two of the named representative’s were inadequate based on an inability to articulate just how such charges were initiated:
As the district court pointed out, because Mancini insisted that he was not really deceived into joining the Entertainment Rewards program and, indeed, decided that he would not do so, but must have accidentally clicked on "Yes," he is not at all typical of the proposed class. And Sanders never saw the site or signed up for the program, and does not really know how his son did so; he too is far from typical of the class. His claim to the contrary abounds in crocodility. The district court did not err in refusing to accept Mancini and Sanders as class representatives.
Stearns, 2011 U.S. App. LEXIS 17454, at 10-11.

While this approach was successful in making a mess of the plaintiff’s CLRA claim (the denial of which the Court upheld), the potential for diverging reliance scenarios among class members was deemed an improper criteria on which to rest denial of certification of the plaintiff's UCL claim. In fact, the Court concluded that the district court erred in finding that predominance was lacking based on concerns that individualized proof of reliance and causation would be required. See id., at 13 (noting that Prop 64 “decidedly did not change the California rule ‘that relief under the UCL is available without individualized proof of deception, reliance and injury’” and as such “the district court's concerns about reliance and causation were not well taken.”). As reasoned by the Court, the determinative factor was whether class members were exposes to uniform representations / omissions which were reasonably likely to deceive, not whether each putative class member was in fact so deceived:
We do not, of course, suggest that predominance would be shown in every California UCL case. For example, it might well be that there was no cohesion among the members because they were exposed to quite disparate information from various representatives of the defendant. See, e.g., Wal-Mart, U.S. at , 131 S. Ct. at 2554-57; Kaldenbach v. Mut. of Omaha Life Ins. Co., 178 Cal. App. 4th 830, 849-50, 100 Cal. Rptr. 3d 637, 652 (2009). On this record, that does not appear to be the case, and the district court did not rule that it was.
Nor do we agree with Appellees' argument that because it need not be shown that class members have suffered actual injury in fact connected to the conduct of the Appellees, the alternative to the district court's ruling must be that the class lacks standing under Article III of the United States Constitution. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 2136, 119 L. Ed. 2d 351 (1992). No doubt a plaintiff's injury must be "concrete and particularized." Id. at 560, 112 S. Ct. at 2136. The injury here meets both of those requirements. Each alleged class member was relieved of money in the transactions. Moreover, it can hardly be said that the loss is not fairly traceable to the action of the Appellees within the meaning of California substantive law. Id.; see also Canyon Cnty. v. Syngenta Seeds, Inc., 519 F.3d 969, 974-75 n.7 (9th Cir. 2008). That law, as already noted, keys on the wrongdoing of Appellees and is designed to protect the public (including the proposed class members). Tobacco II, 46 Cal. 4th at 312, 207 P.3d at 30, 93 Cal. Rptr. 3d at 570. In other words, this is not a case, as was possible under California's UCL before it was amended, where the representative plaintiff need not even show any connection to a defendant's conduct;[] it is plainly a case where Appellants' claim is that they came, saw, were conquered by stealth, and were relieved of their money.[] Basically, Appellees' real objection is that state law gives a right to "monetary relief to a citizen suing under it"[] (restitution) without a more particularized proof of injury and causation.[] That is not enough to preclude class standing here.
Stearns, 2011 U.S. App. LEXIS 17454, 13-15.

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