CALIFORNIA CLASS ACTION LAW

The Second District Court of Appeal, in an unpublished opinion, reversed a trial court’s denial of plaintiff’s motion to certify a nationwide class in Schlesinger v. Superior Court of Los Angeles County (Ticketmaster), B224880, 2010 WL 3398844 (Cal. Ct. App. 2d Dist. Aug. 31, 2010).  Plaintiffs sought certification of a nationwide class of individuals who purchased tickets through Ticketmaster’s Web site. Id. Plaintiffs alleged that ticket buyers paid certain charges which Ticketmaster misled them to believe were pass-through costs rather than a source of profit for Ticketmaster.  Id. Petitioners sought damages on behalf of the putative class pursuant to California’s Unfair Competition Law (Bus. & Prof. Code § 17200, et seq.) (UCL) and the False Advertising Law (Bus. & Prof. Code § 17500, et seq.).  Id.

The trial court found that petitioners had failed to establish the court’s jurisdiction over the claims of the out-of-state plaintiffs.  The Second District reversed, finding that Ticketmaster’s requirement that each purchaser agree that any dispute be resolved by courts located in California and governed by California law establishes sufficient contact to permit the court’s jurisdiction.

Class

Petitioners moved to certify a nationwide class of all individuals who purchased tickets through Ticketmaster’s Web site and paid an “Order Processing Charge” and/or “UPS Delivery” fee from October 21, 1999, onward.

Ticketmaster’s Choice of Law Clause

Tickmaster incorporated a California choice of law and forum clause:

If you have a dispute and your dispute involves an event (or a ticket for an event) that is located in the United States, then the dispute will be governed by the laws of the State of California without regard to its conflict of law provisions and you consent to personal jurisdiction, and agree to bring all actions, exclusively in state and federal courts located in Los Angeles County, California…. If you have a dispute regarding the Site but not regarding an event (and not regarding a ticket for an event), then … if you are accessing the Site from the United States or any country other than Canada, then the dispute will be governed by the laws of the State of California without regard to its conflict of law provisions and you consent to personal jurisdiction, and agree to bring all actions, exclusively in state and federal courts located in Los Angeles County, California.

Nationwide Certification

The court considered the Phillips Petroleum factors to determine whether inclusion of non-resident class members comports with due process: (1) Is the exercise of personal jurisdiction over the claims of non-resident class members constitutional? (2) Is the application of forum law to the claims of non-resident class members constitutional?  Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-13, 822-23 (1985).  In Phillips, the Supreme Court held that a forum state may constitutionally exercise personal jurisdiction over the claims of non-resident class members so long as “minimal procedural due process protection” exists, i.e., the non-resident class members have adequate representation by the named plaintiffs, adequate notice, the opportunity to be heard, and the opportunity to opt out of the class.

Ticketmaster argued that it would be arbitrary and unfair to apply California law to claims of out-of-state class members who never went through an Internet server located in California and whose tickets were processed, shipped, and paid for outside of California.

The court rejected this argument:

There are critical differences between the facts in Norwest and those here. First, Ticketmaster has its headquarters and principal place of business in California. Second, and more significantly, Ticketmaster required each Web site customer to agree that only California law would apply to any disputes, and that any disputes had to be litigated in a state or federal court located in California. We are satisfied that this choice-of-law and forum selection clause provides the ” ‘significant contact or aggregation of contacts’ ” (Phillips, supra, 472 U.S. at pp. 822-823) that renders application of California law to the claims of non-resident class members to comport with due process. (See Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, 461 [“California decisions and the Restatement Second of Conflict of Laws … reflect strong policy considerations favoring the enforcement of freely negotiated choice-of-law clauses”]; Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 495-496 [“No satisfying reason of public policy has been suggested why enforcement should be denied a forum selection clause appearing in a contract entered into freely and voluntarily by parties who have negotiated at arm’s length”].)

The court concluded that there was “no reason why the UCL should not be applied to an out-of-state plaintiff’s claim through a contractual choice of law and forum selection provision imposed by Ticketmaster on its customers.”  With respect to the FAL, the court noted that “[a]lthough the FAL expressly limits its coverage to misleading statements made or disseminated from this state, it nevertheless recognizes the illegality of making false statements to “the public in any state”, reflecting the Legislature’s intent that the FAL provides extraterritorial protection from false claims made in California.”

The court concluded:

In light of the foregoing, we reject Ticketmaster’s argument that a nonresident cannot state a claim pursuant to the UCL and FAL. Because we find that a non-resident can state a claim under the UCL and FAL, we reject Ticketmaster’s claim that out-of-state customers should not be part of the putative class. Ticketmaster set the terms by requiring all of its customers, regardless of their state of residence, to agree not only that California law would apply to their claims, but also that suit could only be brought in a court located within California.

Judges and Attorneys

Acting Presiding Justice Kathryn Doi Todd wrote the opinion for the court.  Justices Judith M. Ashmann-Gerst and Victoria M. Chavez concurred.

Petition for writ of mandate and/or peremptory or alternative writ from order of Hon. Kenneth R. Freeman, Los Angeles Superior Court.

Adorno Yoss Alvarado & Smith, William M. Hensley, Robert J. Stein III, Marc D. Alexander, Claire M. Schmidt, Valerie K. Brennan; Much Shelist Denenberg Ament & Rubenstein and Steven P. Blonder for Petitioners.

Greenberg Traurig, Frank E. Merideth, Jr., Jeff E. Scott, and Gregory A. Nylen for Real Party in Interest.

By CHARLES H. JUNG