By Neal R. Marder and Ali R. Rabbani, Winston & Strawn LLP
On January 12, 2012, the Ninth Circuit issued a decision in Mazza v. American Honda Motor Co.,1 vacating the certification of a nationwide class of purchasers brought under California's consumer protection laws. Nearly one year later, the Ninth Circuit's blockbuster decision in Mazza continues to have a significant impact on nationwide consumer protection class actions.
In Mazza, the Ninth Circuit held that (1) a nationwide class of consumers could not be certified because the nationwide application of California law would impair other states' interests, and (2) even a California-only class could not be certified because there was insufficient evidence to presume reliance by the class as a whole. In the months following this decision, both courts and litigants seemed to agree that the Ninth Circuit's ruling cast serious doubt on the viability of certifying a nationwide class under California's consumer protection laws and limited the applicability of In re Tobacco II Cases.2 A number of recent decisions, however, have called into question the full reach of the Mazza decision. This article explores the ever-evolving impact of Mazza on nationwide class actions.
The Mazza Decision
In Mazza, the plaintiffs purchased cars equipped with an optional feature called the Collision Mitigation Braking System (CMBS), which Honda advertised in product brochures, television commercials, magazine advertisements, and other “smaller-scale marketing efforts” as a way to prevent rear-end collisions.3 Plaintiffs filed a class action complaint against Honda, alleging that these advertisements “misrepresented the characteristics of the CMBS and omitted material information on its limitations” in violation of California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200 et seq., False Advertising Law (FAL), Cal. Bus. & Prof. Code § 17500 et seq., and Consumers Legal Remedies Act (CLRA), Cal. Civ. Code § 1750 et seq.4
The district court granted plaintiffs' motion for certification of a nationwide class under Rules 23(a) and 23(b)(3).5 In particular, the district court held that: (1) common questions of law and fact predominate; (2) California has significant contact or aggregation of contacts to the claims of each class member; (3) Honda did not meet its burden under the choice of law analysis; and (4) the class members were entitled to a presumption of reliance.6
On interlocutory appeal, the Ninth Circuit vacated the district court's decision on two key grounds—choice of law and reliance.
Choice of Law
The Ninth Circuit first addressed Honda's assertion that common issues of law do not predominate because California's consumer protection statutes cannot be applied to a nationwide class.7 Applying California's choice of law analysis, the Ninth Circuit agreed, holding that a nationwide class could not be certified.
Under California's choice of law rules, a plaintiff bears the initial burden of demonstrating that California has “significant contact or significant aggregation of contacts” to the claims of each class member.8 The Ninth Circuit found that “California has a constitutionally sufficient aggregation of contacts to the claims of each putative class member” because Honda's corporate headquarters, the advertising agency that produced the relevant advertisements, and one-fifth of the proposed class members are all located in California.9
The burden then shifts to the defendant to show that foreign law, rather than California law, should apply to the class claims.10To determine whether the interests of other states outweigh California's interest, the court applies a three-step governmental interest test:
• First, the court must determine whether the “relevant law of each of the potentially affected jurisdictions with regard to the particular issue in question is the same or different”;
• Second, if there is a difference, the court must determine whether a “true conflict” exists by examining each jurisdiction's interest in the application of its own law;
• Third, if there is a “true conflict,” the court must compare the nature and strength of the interest of each jurisdiction in the application of its own law “to determine which state's interest would be more impaired” if its law were not applied.11
Applying this test, the Ninth Circuit first determined that there are “at least some” material differences between California's consumer protection laws and the laws of the other states.12 The court noted that Honda “exhaustively detailed” these differences, including, for example, discrepancies between the elements of scienter and reliance.13 The Ninth Circuit next determined that “each state has a strong interest in applying its own consumer protection laws” to the relevant car sales.14 And finally, the Ninth Circuit concluded that applying California law to the entire class would impair other states in their “ability to calibrate liability to foster commerce.”15 In particular, the court noted that the place of the wrong—i.e., the state where the last event necessary for liability occurred—has the predominant interest.16 The court thus held that each class member's claim “should be governed by the consumer protection laws of the jurisdiction in which the transaction took place.”17
The Ninth Circuit next addressed Honda's contention that common issues of fact do not predominate because the CMBS advertising campaign did not support a presumption of reliance.18 The Ninth Circuit held that even a California class could not be certified because Honda's advertising campaign was not extensive enough to presume reliance by the class as a whole.
As an initial matter, the Ninth Circuit considered whether Tobacco II—which held that only the named plaintiff in an action under the UCL needs to plead and prove that it suffered injury in fact and lost money or property as a result of the alleged wrongdoing19—impermissibly allows a class to include members who suffered no injury in fact in violation of Article III.20 Admitting that “it is not a simple or a clear cut matter,” the Ninth Circuit held that the California class members have Article III standing.21
Nonetheless, the Ninth Circuit determined that the misrepresentations at issue did not justify a presumption of reliance because “it is likely that many class members were never exposed to the allegedly misleading advertisements, insofar as advertising of the [CMBS] system was very limited.”22 In contrast, the court noted that the advertising campaign in Tobacco II was “decades-long” and left “little doubt that almost every class member had been exposed to defendants' misleading statements.”23 The Ninth Circuit thus held that, in the absence of “the kind of massive advertising campaign at issue in Tobacco II,” the relevant class must be defined to include only members who were exposed to the allegedly misleading advertising.24 The court also held that the relevant class must “exclude those members who learned of the CMBS's allegedly omitted limitations before they purchased or leased the CMBS system.”25
The Aftermath of the Mazza Decision
In the wake of the Mazza decision, both litigants and district courts seemed to agree that Mazza precluded, as a matter of law, certification of nationwide classes brought under California's consumer-protection laws. The case of Kowalsky v. Hewlett-Packard Co.26 is an early example of a district court finding that Mazza proscribes the certification of a nationwide class under these circumstances. There, the plaintiff alleged that Hewlett-Packard manufactured, marketed, and sold thousands of defective printers nationwide, including in California, and made misrepresentations and concealed material information in the marketing, advertising and sale of those printers.27 The plaintiff, a resident of New Jersey, brought these claims on behalf of himself and a nationwide class under the UCL and CLRA.28 The court denied plaintiff's motion for class certification, noting:
The court agreed, finding that “Mazza controls and forecloses the certification of the proposed nationwide class.”30
Similarly, in Granfield v. NVIDIA Corp.,31 the plaintiff brought a putative nationwide class action alleging, among other things, that NVIDIA violated the UCL and CLRA by manufacturing and selling defective graphics processing units. The plaintiff, a resident of Massachusetts, conceded that “under Mazza, she is not entitled to bring a claim under California law in light of the fact that she purchased her computer in Massachusetts.”32 Given this concession, the court granted NVIDIA's motion to dismiss the plaintiff's California claims, holding that “Plaintiff's disagreement with the clear holding of the Ninth Circuit [in Mazza] is not sufficient to sustain her California law claims.”33
Not all district courts have come to the same conclusion, however. In Bruno v. Eckhart Corp.,34 the Central District of California denied a motion to decertify a nationwide class based on Mazza. The plaintiff there alleged that the defendants made misrepresentations by advertising that their liquid product has “six times better absorption and effectiveness than the equivalent active ingredient in competing brands.”35 The plaintiff brought a putative nationwide class action alleging violations of the UCL, FAL, CLRA, and breach of express warranty, and the court certified the class.36
In declining to decertify the class, the district court in Bruno held that Mazza did not eliminate California's choice-of-law analysis, which must be applied on a case-by-case basis “because it requires analyzing various states' laws ‘under the circumstances of the particular case’ and given ‘the particular [legal] issue.’”37 The court also found that Mazza did not reassign the burden placed on a defendant “to show that another state's law, rather than California law, should apply to class claims.”38 Finally, the court distinguished Mazza from the case before it because in Mazza “the defendants ‘exhaustively detailed’ material differences in California and other states' laws, whereas here Defendants simply cited a case reaching the legal conclusion they urged.”39
More recently, in In re POM Wonderful LLC Marketing and Sales Practices Litigation, the Central District of California certified a nationwide class action alleging violations of the UCL, FAL, and CLRA.40 There, the plaintiffs alleged that Pom's claims that its juice products have a variety of health-related benefits, and that these health claims are supported by tens of millions of dollars in medical research, are false and misleading.41
In opposing certification, and in reliance on Mazza, Pom argued that the proposed class could not be certified because California law cannot be applied to consumers nationwide.42 In support of its opposition, Pom attached a chart of each state's consumer protection laws, which summarized each law's provisions regarding scienter, reliance and timeliness, as well as remedies and defenses.43
While the court acknowledged that “[i]n some instances, of course, the particular facts of a case will demonstrate that a true conflict of laws does exist,” the court found that “[t]o the extent that Pom argues that California law cannot be applied to consumers nationwide as a matter of law, Pom is incorrect.”44 The court went on to differentiate Mazza because the defendant there “met its burden to demonstrate material differences in state law and show that other states' interests outweighed California's.”45 In contrast, the district court held that Pom did not meet its burden of demonstrating that foreign law, rather than California law, should apply.46
In particular, the court criticized Pom's chart of each state's consumer protection laws because it did not “indicate which of these foreign laws differ from California's laws.”47 Moreover, the court stated that even if Pom's chart was sufficient to satisfy Pom's burden with respect to the first step of California's choice-of-law analysis, “nowhere does Pom apply the facts of this case to those laws or attempt to demonstrate, beyond citation to Mazza, that a true conflict exists,” thus failing to carry its burden with respect to the second and third steps.48 Accordingly, the court held that “California law applies here to a nationwide class.”49
District courts have also recently declined to follow Mazza’s decision limiting the reach of Tobacco II's presumption of reliance. In Keegan v. American Honda Motor Co.,50 the plaintiffs brought a nationwide class action against Honda alleging that it “actively concealed” a defect in the rear suspension of its cars in violation of the UCL, CLRA, Song-Beverly Act, Magnuson-Moss Warranty Act, and various states' consumer protection and implied warranty statutes.51 In opposing class certification, Honda argued, among other things, that California law could not be applied to individuals who reside and purchased their cars outside the state.52
In applying California's choice of law analysis, the court noted that it was “mindful of the Ninth Circuit's warning [in Mazza] that differences in state law concerning the need for proof of reliance can ‘spell the difference between the success and failure of the claim.’”53 The district court distinguished the case before it, however, because Honda allegedly did not disclose information regarding the alleged defect “to any member of the class.”54 Accordingly, the court found that “[t]here is no question of different statements being made to different groups of consumers, or certain class members being exposed to information others were not.”55
In the months following the Ninth Circuit's decision in Mazza, the general consensus among litigants and district courts was that plaintiffs will have a more difficult time certifying a nationwide class under California's consumer protection laws. However, recent decisions, such as In re POM Wonderful, have called into question the full reach of the Mazza decision. Accordingly, defense counsel can no longer merely rely on Mazza as a defense to nationwide class certification as a matter of law.
In particular, those opposing nationwide class certification must be mindful of their burden under California's choice of law analysis. It is not enough to simply cite Mazza or attach a chart generally summarizing the consumer protection statutes of various states. Rather, defense counsel must make an effort to “exhaustively detail” the material differences between California and foreign law and clearly explain why the interests of each jurisdiction would be impaired by the application of California law.
Finally, the Ninth Circuit's ruling in Mazza expressly limited the application of Tobacco II's presumption of reliance in the absence of a “massive” and long-term advertising campaign, providing defense counsel with grounds to oppose class certification on the basis of variations in advertising. However, recent district court decisions, such as Keegan, have called into question the reach of Mazza in this respect, as well. Defense counsel must therefore make an effort to specify potential differences in consumer exposure to an advertising campaign in order to defeat class certification on reliance grounds.
Neal R. Marder is a partner in the Los Angeles office of Winston & Strawn LLP. He concentrates his practice on complex business and commercial litigation, white collar, securities, internal investigations, and antitrust, with an emphasis on the defense of class actions. Marder can be contacted at email@example.com.
Ali R. Rabbani is an associate in the Los Angeles office of Winston & Strawn LLP. His practice is comprised of a broad range of complex commercial litigation, including securities, mergers and acquisitions, corporate governance, consumer fraud class action, employment, and bankruptcy-related litigation. Rabbani can be reached at firstname.lastname@example.org.
This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.
©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.
To view additional stories from Bloomberg Law® request a demo now