The U.S. Court of Appeals for the Ninth Circuit has reined in the ability of federal courts to certify consumer product class actions under California’s broad consumer protection statutes. Specifically, the Ninth Circuit held that choice-of-law issues prevented certification of a nationwide automobile purchaser class, and that even a California-only class was precluded by individualized issues of reliance. In doing so, the Ninth Circuit confirmed that the "rigorous analysis" standard recently affirmed by the Supreme Court in Wal-Mart v. Dukes applies with full force in consumer product class actions.

In Mazza, et al. v. American Honda Motor Co., Inc., plaintiffs sued Honda alleging that it deceptively advertised the capabilities of the Collision Mitigation Braking System (CMBS) in the Acura RL, including alleged omissions regarding the system’s limitations. The U.S. District Court for the Central District of California certified a nationwide class of purchasers under two California consumer protection statutes.

In certifying the nationwide class, the district court determined that (1) California law could be applied to all class members (residing in 44 different states) because Honda failed to show material differences in state law or that other states had a sufficient interest in the litigation, and (2) class members were entitled, under California law, to an inference that each class member saw and relied upon the allegedly deceptive advertising.

The Ninth Circuit reversed, finding that the trial court had committed error in its choice-of-law analysis and abused its discretion as to the issue of presumed reliance. In finding that California law could not apply to a nationwide class, the Ninth Circuit acknowledged that there are numerous material differences between California consumer protection statutes and those of other states, including with respect to scienter, reliance, and available remedies. Moreover, while Honda is a California corporation, the court found that federalism does not permit California’s policy preferences for aggressive consumer protection and the regulation of companies within its borders to trump the policy preferences of more business-friendly jurisdictions where absent class members reside.

In favoring the latter, the Ninth Circuit confirmed that the state in which the advertising was viewed and relied upon by the purchaser—and not the state in which the advertising was created—constituted the "place of the wrong".

The Ninth Circuit also held that individual issues predominated to preclude certification of even a California-only class. The appellate court acknowledged that California law does not permit recovery by consumers who never were exposed to allegedly false advertising. The district court had avoided this issue by ruling that the class was entitled to a presumption of reliance given that the advertising allegedly was misleading because of information that was omitted. The Ninth Circuit clarified that the presumption of reliance—stemming from California Tobacco litigation—arises only in the presence of an "extensive and long-term [fraudulent] advertising campaign" and not where purchasers were exposed to disparate information or where the advertising was limited in scope.

"In the absence of the kind of massive advertising campaign at issue in [Tobacco]," the court said, "the relevant class must be defined in such a way as to include only members who were exposed to advertising that is alleged to be materially misleading." The court found that Honda’s product brochures and TV commercials fell short of that standard.

The Mazza decision is a significant development and should find a prominent place in consumer product defendants’ arguments against class certification in the Ninth Circuit. It casts serious doubt on the propriety of certifying a nationwide class under California’s consumer protection statutes—even when the defendant is a California corporation—and it significantly restricts the presumption of reliance in the absence of a massive and extended advertising campaign.

Ballard Spahr’s Product Liability and Mass Tort Group and Consumer Class Action Litigation Group have substantial experience defending class actions involving consumer fraud, warranty, and product liability allegations in New Jersey and around the country. For more information, please contact Neal Walters at 856.761.3438 or waltersn@ballardspahr.com, or Michael R. Carroll at 856.761.3452 or carrollm@ballardspahr.com. 


Copyright © 2012 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.