Northern District Rejects Collateral Estoppel, Finding Sufficient Difference in Allegedly Misleading Statements

by charlesjung

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The Northern District denied a motion to strike class allegations from a putative class action complaint, finding sufficient difference between the allegedly deceptive statements in the prior case and the present case to reject defendant’s collateral estoppel contentions.  Murray v. Sears, Roebuck and Co., No. 09-05744 CW, 2010 WL 3490214 (N.D. Cal. Sept. 3, 2010) (slip op.).

Plaintiff Martin Murray brought a complaint against Defendants Sears, Roebuck and Co. and Electrolux Home Products, Inc., alleging violations of the California Consumer Legal Remedies Act and the California Unfair Competition Law, unjust enrichment and breach of contract in connection with certain Kenmore laundry dryers. Id. *1.  Defendants moved to strike the class allegations from Plaintiff’s complaint as barred by collateral estoppel based upon prior rulings by the Seventh Circuit in Thorogood v. Sears, Roebuck & Co., 547 F.3d 742 (7th Cir.2008) (Thorogood I), and Thorogood v. Sears, Roebuck & Co., 595 F.3d 750 (7th Cir.2010) (Thorogood II).

The Prior Case

Thorogood sought certification of a class of consumers from twenty-nine jurisdictions, including California, consisting of buyers of the same dryers at issue in the instant case.  Id. The issue in Thorogood and here was whether these dryers were marketed using deceptive trade practices which misled consumers to believe that the dryers contained drums that were 100% stainless steel. Id.

The Seventh Circuit reversed the district court’s grant of class certification.  Id. The Seventh Circuit decertified the class in Thorogood finding that there are no common issues of law or fact. Id. (citing Thorogood I, 547 F.3d at 747. The Seventh Circuit summarized Thorogood’s allegation as follows:  The Seventh Circuit concluded that the plaintiff’s concerns were “idiosyncratic” and that the “evaluation of the class members’ claims will require individual hearings.” Id. *3. The “deal breaker” against Thorogood’s class allegations was “the absence of any reason to believe that there is a single understanding of the significance of labeling or advertising clothes dryers as containing a ‘stainless steel drum.’ ” Id. *4.

After the case was remanded to the district court, Sears served Thorogood with a Federal Rule of Civil Procedure 68 offer of judgment.  Id. *1. After Thorogood did not respond to the offer, Sears moved to dismiss the case, arguing that once Thorogood rejected an offer of judgment consisting of all the relief he could have received had he prosecuted the case to judgment, the case became moot and the court should dismiss it for lack of subject matter jurisdiction. Id. The court agreed, and the case was dismissed.  Id.

Motion to Strike

Applying federal law, the court stated the collateral estoppel or issue preclusion standard as follows:

(1) the issue necessarily decided at the previous proceeding is identical to the one which is sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the first proceeding.

Id. *2 (citing Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 (9th Cir. 2006).

The Court looks to four factors to aid in “[d]etermining whether two issues are identical for purposes of collateral estoppel: (1) is there a substantial overlap between the evidence or argument to be advanced in the second proceeding and that advanced in the first? (2) does the new evidence or argument involve the application of the same rule of law as that involved in the prior proceeding? (3) could pretrial preparation and discovery related to the matter presented in the first action reasonably be expected to have embraced the matter sought to be presented in the second? and (4) how closely related are the claims involved in the two proceedings?”

Id. *3 (citing Resolution Trust Corp. v. Keating, 186 F.3d 1110, 1116 (9th Cir.1999).

Holding

The court held that plaintiff had sufficiently amended his complaint to differentiate it from the Thorogood complaint to avoid collateral estoppel.  Id.

Unlike the complaint in Thorogood, the amended complaint includes allegations that Defendants expressly advertised the significance of the fact that their dryers contain stainless steel drums. For instance, Sears’ website describes the “Stainless Steel Drum” as “Durable Drum eliminates rusting and chipping for long lasting performance.” First Amended Complaint (1AC) ¶ 50 (emphasis added). Sears’ website and in-store brochures state that Kenmore Dryers will “KEEP YOU CLOTHES LOOKING GREAT: An exclusive, all stainless steel drum provides lasting durability.” Id. ¶ 52 (upper case in original; emphasis added). These allegations are of the precise type that the Seventh Circuit said would distinguish Thorogood from a claim in which common issues might predominate.  Because the allegations in the instant case are sufficiently different from those in Thorogood, the class certification issues necessarily decided in the previous proceeding are not identical to those presently before the Court. Plaintiff is not collaterally estopped from asserting his claims on a class-wide basis.

Id. *4

Judge

District Judge Claudia Wilken

By CHARLES H. JUNG

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