GM Ignition and the “Benefit of the Bargain” Theory

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Last week, Judge Jesse M. Furman issued a 103-page ruling disposing of New GM’s partial motion to dismiss.  At the crux of the opinion were plaintiffs’ two damages theories.

First, as the court put it, plaintiffs “pursue an unprecedented theory of damages, one that turns not on whether the vehicles at issue were sold with known, latent defects … but rather on the alleged reduction in resale value of the vehicles due to damage to New GM’s reputation and brand.”  Not surprisingly, given the court’s tone in characterizing the theory, the court ruled the first theory was “unsound.”

Second, plaintiffs also seek damages based on a much more well-established methodology: the benefit of the bargain theory.  As the court described that theory:

The gravamen of the benefit-of-the-bargain defect theory is that Plaintiffs who purchased defective cars were injured when they purchased for x dollars a New GM car that contained a latent defect; had they known about the defect, they would have paid fewer than x dollars for the car (or not bought the car at all), because a car with a safety defect is worth less than a car without a safety defect.

Although New GM argued that this theory too failed “across the board” and that it “always requires a plaintiff to prove manifestation of the alleged defect,” the court held that while different jurisdictions have reached different conclusions, in many jurisdictions the damages theory is viable:

New GM is wrong in arguing that the benefit-of-the-bargain defect theory must fail because New GM did not warrant that its cars would have a particular resale value in the future.  

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Wisconsin District Court Analyzing Restitution Under California Law

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In an earlier post, we wrote about the Ninth Circuit’s Pulaski decision, which analyzed restitution under California law among other topics.  A new and thorough opinion from U.S. District Judge J.P. Stadtmueller in Le v. Kohls Dept. Stores, Inc., No. 15-cv-1171 (E.D. Wi. Feb. 8, 2016), expands further on those principles.

The Le case arises from allegations that Kohls Department Stores engages in a continuous marketing campaign that falsely advertises that its products are sold at far higher priced by other merchants.  Mr. Le sought restitution under California’s CLRA and UCL statutes and sought to enjoin the misleading advertising going forward.

Kohls moved to dismiss the restitution claim on the grounds “that the only legally cognizable method of calculating Le’s restitution is through the price-to-value method,” which requires showing the delta between price paid and value received.  Le responded that while it was premature at the pleading stage to sayprecisely how restitution should be calculated, other options existed — full restitution, partial restitution based on the false “transaction value” promised by Kohls, or restitution tied to Kohls’ profits from the scheme. The court agreed:

the Court agrees with Le’s interpretation of California law, namely, that restitutionary relief under the UCL and CLRA is not strictly and categorically confined to the price-to-value method as proffered by Kohls.

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Comcast, Restitution, and Trump University

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As California courts continue to grapple with the Supreme Court’s 2013 Comcast v. Behrend decision and appropriate restitution calculations under California’s consumer protection statutes, a recent decision from Judge Gonzalo P. Curiel of the Central District of California provides helpful analysis. Makaeff v. Trump University, LLC, 309 F.R.D. 631 (C.D. Cal. 2015).

The Trump case arose from real estate seminar students’ claims that, in short, they didn’t get what they were promised.  Plaintiffs brought suit under California’s CLRA and UCL, as well as under Florida’ FDUTPA and New York’s General Business Law sec. 349(h).

The primary issue was whether plaintiffs’ proposed classwide restitution and damages model complies with Comcast and applicable state law: Plaintiffs argued that they received no value (or at best de minimis value) in exchange for their money, and argued they were thus entitled to full refunds. Defendants, for their part, argued that state law doesn’t condone a “full refund” theory, and instead requires an amount-paid minus value-received calculation.

The court sided with plaintiffs. First, under California law, plaintiffs were entitled to offer evidence to substantiate their theory that “only a full-refund will return them to the position that they were in before being ensnared by Defendants’ scam.”  Makaeff, 309 F.R.D.… Read more

Further Ninth Circuit Clarification on Comcast and Restitution Under California Law

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Since Comcast v. Behrend, 133 S. Ct. 1426 (2013), was handed down, district courts in the Ninth Circuit have grappled with whether certification under Rule 23(b)(3) requires that damages be susceptible to classwide calculation, with some saying yes and others no. The Ninth Circuit handed down rulings in 2013 and 2014 saying that even post-Comcast it remains permissible under Rule 23(b)(3) for damages calculations to be individualized. See Leyva v. Medline Indus., 716 F.3d 510, 513-14 (9th Cir. 2013); Jimenez v. Allstate Ins., 765 F.3d 1161, 1167 (9th Cir. 2014). Both of these decisions rely on the pre-Comcast Ninth Circuit ruling in in Yokoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087 (9th Cir.2010).

Despite this series of clarifying rulings, courts in the Ninth Circuit have continued to hold that Comcast requires a classwide damages model. E.g., In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 1021 (C.D. Cal. 2015) (“Rule 23(b)(3) is satisfied only if plaintiffs can show that damages are capable of measurement on a classwide basis.”); McVicar v. Goodman Glob., No. 13-cv-1223, 2015 WL 4945730, at *14 (C.D. Cal. Aug. 20, 2015) (“At the class certification stage, Plaintiffs must present a theory that can measure, on a class-wide basis, damages attributable to Plaintiffs’ theory of liability.”).… Read more