The year 2017 has brought in several consumer-friendly arbitration rulings, with several federal appellate courts refusing to enforce arbitration clauses. Today, the California Supreme Court followed suit, ruling that a Citibank arbitration provision did not bar its customers from proceeding in court with claims seeking a public injunction under California consumer protection law.
Dating back to 1999, in its decision in Broughton v. Cigna Healthplans of California, 21 Cal.4th 1066 (1999), the California Supreme Court has held that California law does not permit arbitration of claims brought for broad, public injunctive relief. The Court reaffirmed that principle in 2003 in Cruz v. PacifiCare Health Systems, Inc., 30 Cal.4th 303 2003). And it has remained in effect, at least in California state courts, ever since.
The US Supreme Court’s Concepcion decision in 2011 engendered doubt as to whether the Broughton and Cruz decisions remain in effect, or whether they are instead preempted by the Federal Arbitration Act. A series of district court decisions in 2011 and 2012 reached differing outcomes, and the Ninth Circuit ultimately ruled in Kilgore v. KeyBank N.A. that the FAA does preempt the Broughton-Cruz rule.
Today’s California Supreme Court ruling in McGill v. Citibank appeared poised to either contradict or fall in line with Kilgore. … Read more
Last week, the Third Circuit was presented with an arbitration issue that dealt with, as the court put it, “an unusual hybrid of technology.” The defendant had offered services through an interactive telephone system. But the contract that purportedly bound plaintiffs to arbitration was located exclusively on defendant’s website.
Because of the disconnect between the phone-based interaction between the parties, on the one hand, and the web-located terms of service, on the other, the court declined to compel arbitration. James v. Global TelLink Corp., — F.3d —, 2017 WL 1160893 (3d Cir. 2017).
The court emphasized that while defendant informed telephone users their service was governed by website terms, users were not required to visit the website or otherwise demonstrate acceptance of the website’s terms.
The Third Circuit then distinguished various lines of cases. It distinguished cases where plaintiffs had “manifested assent through the affirmative act of signing contracts”; where the contractual terms had been “immediately accessible to online users”; where plaintiffs had “received a copy of the contract with their [purchase] and conceded that they had notice of the [relevant] clause”; and where the plaintiffs “received physical copies of the terms and conditions upon opening the products, and their subsequent use of the products manifested assent.”
The court concluded by emphasizing that while arbitration is a favored remedy where the parties assent to its use, arbitration cannot be compelled where one party did not agree to arbitrate:
Congress has made clear that arbitration is an important federal policy and the Supreme Court has vindicated that policy many times.
… Read more
In less than two weeks, the Supreme Court will hear oral argument on the following issue: Whether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.
The underlying decision, which we’ve written about previously, is the Ninth Circuit’s ruling in Baker v. Microsoft. In Baker, the district court struck class allegations, Plaintiffs sought leave to appeal under Federal Rule of Civil Procedure 23(f), and leave was denied. Plaintiffs then voluntarily dismissed their individual claims with prejudice and appealed. The Ninth Circuit concluded it had jurisdiction because the dismissal – even though it came by stipulation – was “sufficiently adverse” to be an appealable final decision.
With the Supreme Court poised to rule in Baker, the Ninth Circuit recently issued a second published decision involving a similar issue. Bates v. Bankers Life & Casualty Co. In Bates, as in Baker, the district court granted a motion to strike class allegations. From there, the posture of the cases diverged. Rather than voluntarily dismissing with prejudice (as in Baker), the Bates plaintiffs filed an unopposed motion for entry of final judgment pursuant to Federal Rule of Civil Procedure 54(b).… Read more
Last week, the Ninth Circuit affirmed certification of nationwide classes in a suit featuring RICO, contract, and other claims. The published opinion dealt with a range of issues, including typicality, predominance, and superiority.
The case is Just Film, Inc. v. Buono. No. 14-16132, 2017 WL 510452 (9th Cir. Feb. 7, 2017). The full opinion is worth a read; a few highlights follow.
One argument defendants raised was that the named plaintiffs’ injuries differed from the injuries suffered by other class members. The Ninth Circuit held that the differing injuries did not defeat typicality:
The requirement of typicality is not primarily concerned with whether each person in a proposed class suffers the same type of damages; rather, it is sufficient for typicality if the plaintiff endured a course of conduct directed against the class. Although Campbell was able to fend off the attempted fraud before it reached into and diminished her bank account, there is no reason why she cannot prove the nature of the fraudulent scheme for benefit of all class members, whether or not their precise injuries are identical.
Defendants challenged predominance on several grounds, including that damages would vary by class member and would require individualized evidence. … Read more
Judge David Carter of the Central District of California answered this question recently in the Peterson v. Costco Wholesale Co. In Peterson, a Hepatitis A outbreak in the western United States was linked to the consumption of a berry mix sold at Costco locations. Plaintiffs sued Costco, asserting strict liability and other common law claims. Judge Carter certified nine single-state subclasses for the purposes of determining liability.
Most recently, the question posed at summary judgment was whether plaintiffs could “demonstrate any defect in the berry mix.” Petersen v. Costco Wholesale Co., 2017 WL 187134, at *4 (C.D. Cal. Jan. 17, 2017). An answer in the affirmative was needed for plaintiffs’ strict liability claim to proceed.
Costco argued there was no evidence of a defect, contending that plaintiffs should have to demonstrate that they each “ate berry mix that was actually contaminated with hepatitis A and thus each … was actually exposed to hepatitis A.” Plaintiffs countered that the berry mix was defective because, anyone who ate the berries urgently needed to obtain a hepatitis A vaccination. And Costco replied that, if plaintiffs’ theory was accepted, then the court would be saying that as a matter of law, “a recall alone demonstrates defect in the recalled products.”
Judge Carter sided with the plaintiffs:
the mere fact of a recall is insufficient to render a defendant liable under a theory of strict products liability to everyone who purchased a recalled product.
… Read more
After a longer delay than several other circuits, the Ninth Circuit has again provided analysis of the Supreme Court’s Spokeo decision – this time in the TCPA context.
In the TCPA context, a strong majority of courts appear to be in agreement that statutory violations give rise to concrete harm. The Ninth Circuit agrees.
The panel in Van Patten v. Vertical Fitness Group, began its Article III analysis by citing Spokeo for the proposition that “’both history and the judgment of Congress play important roles’ in supporting our conclusion that a violation of the TCPA is a concrete, de facto injury.”
The court elaborated:
The TCPA establishes the substantive right to be free from certain types of phone calls and texts absent consumer consent. Congress identified unsolicited contact as a concrete harm, and gave consumers a means to redress this harm. We recognize that Congress has some permissible role in elevating concrete, de facto injuries previously inadequate in law “to the status of legally cognizable injuries.” Spokeo, 136 S. Ct. at 1549 (quoting Lujan, 504 U.S. at 578). We defer in part to Congress’s judgment….
[T]he telemarketing text messages at issue here, absent consent, present the precise harm and infringe the same privacy interests Congress sought to protect in enacting the TCPA.
… Read more
In-depth analyses on the Supreme Court’s Spokeo decision have now been handed down by the Third, Seventh, and other Circuits. Little has come from the Ninth Circuit thus far, though that court recently heard oral argument in Spokeo itself on remand from the Supreme Court. While we await that decision, a recent ruling from a different Ninth Circuit panel may impact or foreshadow the Spokeo panel’s ruling.
In Syed v. M-I, LLC, — F.3d —-, No. 14-17186, 2017 WL 242559 (9th Cir. Jan. 20, 2017), the Ninth Circuit briefly addressed Spokeo in the context of the Fair Credit reporting act. Here’s the full analysis:
Syed has established Article III standing. A plaintiff who alleges a “bare procedural violation” of the FCRA, “divorced from any concrete harm,” fails to satisfy Article III’s injury-in-fact requirement. Spokeo, Inc. v. Robins, — U.S.—, 136 S. Ct. 1540, 1549 (2016). However, Syed alleges more than a “bare procedural violation.” The disclosure requirement at issue, 15 U.S.C. § 1681b(b)(2)(A)(i), creates a right to information by requiring prospective employers to inform job applicants that they intend to procure their consumer reports as part of the employment application process. The authorization requirement, § 1681b(b)(2)(A)(ii), creates a right to privacy by enabling applicants to withhold permission to obtain the report from the prospective employer, and a concrete injury when applicants are deprived of their ability to meaningfully authorize the credit check.
… Read more
In the past week, panels from the Third and Seventh Circuits have issued rulings that interpret the Supreme Court’s Spokeo decision on Article III standing. The decisions reflect a possible circuit split concerning the test for determining when the violation of a federal statute gives rise to a “concrete” harm under Spokeo.
In the Supreme Court’s decision, there are several references to “risk of harm” in the discussion of when a statutory violation causes concrete harm. For example, toward the end of the opinion, the Court wrote:
A violation of one of the FCRA’s procedural requirements may result in no harm. For example, even if a consumer reporting agency fails to provide the required notice to a user of the agency’s consumer information, that information regardless may be entirely accurate. In addition, not all inaccuracies cause harm or present any material risk of harm. An example that comes readily to mind is an incorrect zip code. It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.
In its recent Horizon decision, the Third Circuit held that the “material risk of harm” language in Spokeo should not be read to raise the bar for pleading concrete injury:
Although it is possible to read the Supreme Court’s decision in Spokeo as creating a requirement that a plaintiff show a statutory violation has caused a “material risk of harm” before he can bring suit, 17 id.
… Read more
In a published decision handed down on Thursday, the Ninth Circuit affirmed a denial of a motion to compel arbitration in a class action about the performance of the Galaxy S4 phone.
The court’s analysis hinged in large part on the circumstances surrounding the purchase, including the location of the arbitration language. Plaintiff bought the phone at a Verizon Wireless store. Inside the box, a warranty brochure purported to require the plaintiff to arbitrate any disputes with Samsung arising from the “warranty or the sale, condition or performance of the product.” Plaintiff did not read the brochure and left it, along with the box, at the Verizon store when he left with his new phone. The receipt plaintiff received said that he agreed to arbitrate any disputes with Verizon, but did not mention Samsung.
Samsung tried to force arbitration under two theories. First, by arguing that the inclusion of the arbitration provision in the warranty brochure created a contract between plaintiff and Samsung. Second, Samsung argued that by signing his agreement with Verizon, plaintiff agreed to arbitrate his claims against Samsung. The Ninth Circuit rejected both arguments.
On the first, the panel rejected Samsung’s theory that the warranty brochure created a binding contract between plaintiff and Samsung to arbitrate, relying on the general California rule that an offeree’s silence does not constitute consent. … Read more
A recent post noted that several recent decisions have undermined the privity requirement that has been applied to breach of implied warranty claims under the U.C.C. in California. A recent Central District of California opinion continues that trend.
In Michael v. Honest Co., No. 15-cv-07059 (C.D. Cal. Dec. 6, 2016), Judge John A. Kronstadt declined to dismiss both express and implied warranty claims under California law. Plaintiffs brought their implied warranty claims under California’s U.C.C. provision, rather than under the Song Beverly Consumer Warranty Act (which does not have a privity requirement).
The court held first that “Plaintiffs’ express warranty claim is sufficiently alleged because vertical privity is not required for such claims.” The court then recognized that while privity is required under the California U.C.C. provision for implied warranty claims, there is a recognized exception for when the plaintiff is a third-party beneficiary of the contract between the manufacturer and retailer. Because plaintiffs had bought a consumer product (sunscreen), the court had no trouble holding plaintiffs were third-party beneficiaries and that the privity requirement did not apply.… Read more