CALIFORNIA CLASS ACTION LAW

The Ninth Circuit Court of Appeals in Kelley v. Microsoft Corporation, No. 09-35699, 2010 WL 3556196 (9th Cir. Sept. 14, 2010) (slip op.) reversed in part a class certification decision for failure to properly conduct the predominance inquiry under Rule 23(b)(3).  Id. *1.  The case involves alleged misrepresentations and omissions in Microsoft Corporation’s (“Microsoft”) pre-release marketing of its Windows Vista operating system.  Id. Plaintiffs-Appellants appealed the denial of their motion for narrowed class certification of two classes proposed after the district court decertified their original class.  Id. The district court held that the putative classes failed to meet the predominance requirement of Federal Rule of Civil Procedure 23(b)(3).

The Ninth Circuit found that the district court erred by failing to balance the issues requiring individualized proof with common questions of law or fact, which the district court had already identified in its previous certification order:

The district court failed properly to conduct the predominance inquiry under Rule 23(b)(3). To certify a class under Rule 23(b)(3), a district court must, inter alia, “determine whether common or individual issues predominate in a given case.” Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 593 (9th Cir. 2010) (en banc) (internal quotation marks omitted). “[T]he main concern in the predominance inquiry … [is] the balance between individual and common issues.” In re Wells Fargo, 571 F.3d at 959. Here, the district court relied exclusively on its conclusion that claims involving deceptive practices brought under the Washington Consumer Protection Act (“CPA”), Wash. Rev.Code § 19.86.010 et seq., require individualized proof of proximate causation to find that “the predominant questions [in this putative class action] would relate to Plaintiffs’ subjective understanding of the Express Upgrade program and their individual belief in Microsoft’s Vista advertising campaign.” The district court failed to consider, or to balance against the issues requiring individualized proof, any questions of law or fact common to the Express Upgrade class members, despite identifying several such questions in the Rule 23(a)(2) commonality analysis in its February 2008 certification order.  [FN1] See In re Wells Fargo, 571 F.3d at 959 (holding that it is reversible error to “rely[ ] on [one factor] to the near exclusion of other factors relevant to the predominance inquiry”).

Id.

The Ninth Circuit also found that class members’ understanding of Defendant’s upgrade program and knowledge of Microsoft’s Vista advertising campaign is amenable to class-wide treatment in some respects.  Id. In particular, the court found that the fundamental aspects of the product were largely encompassed within the alleged misrepresentation:

For instance, common questions exist regarding the extent of the consumer education efforts that Microsoft allegedly controlled through its Windows Vista Capable marketing program. Further, this case is unlike instances where the alleged misrepresentation goes to only one feature of the product and there are numerous reasons why a consumer might use the product other than the feature misrepresented. See Poulos v. Caesars World, Inc., 379 F.3d 654, 665, 667 (9th Cir.2004). The allegedly fundamental aspects of the product sought through the Express Upgrade program are largely encompassed within the alleged misrepresentation–namely, that a computer labeled “Vista Capable” and upgradeable to Windows Vista Home Basic could run “Vista.” Cf. Id. at 665 (noting the “unique nature of gambling transactions” and holding that “gambling is not a context in which [the court] can assume that potential class members are always similarly situated”).

Id.

The Ninth Circuit found that the district court also erred by failing to consider whether other elements of a CPA claim present questions of law or fact common or individual to the class members (e.g., whether the allegedly deceptive practice affects the public interest), and what effect those questions, if any, have on the Rule 23(b)(3) predominance inquiry.  Id. *2.

Judges and Attorneys

Before Circuit Judges William Cameron Canby, Jr., Sidney Runyan Thomas, and Marsha L. Berzon.

Appeal from the United States District Court for the Western District of  Washington, District Judge Marsha J. Pechman, Presiding. D.C. No. 2:07- cv-00475-MJP.

Ian S. Birk, William C. Smart, Keller Rohrback LLP, Jeffrey Morgan Thomas, I, Esquire, Jeffrey Iver Tilden, Esquire, Mark A. Wilner, Esquire, Gordon Tilden Thomas & Cordell LLP, Seattle, WA, for Plaintiffs-Appellants.

Charles B. Casper, Montgomery, McCracken, Walker & Rhoads, LLP, Phildelphia, PA, Cassandra Lynn Kinkead, Esquire, Stephen M. Rummage, Esquire, Charles S. Wright, Davis Wright Tremaine LLP, Seattle, WA, for Defendants-Appellees.

By CHARLES JUNG