CALIFORNIA CLASS ACTION LAW

The Fourth District Court of Appeal reversed a denial of class certification in Kershenbaum v. Buy.com, Inc.,  No. G042303, 2010 WL 3800339 (Cal. Ct. App. 4th Dist. Sept. 30, 2010).  Plaintiff Richard M. Kershenbaum did not receive an advertised rebate on a product he purchased through Buy.com, Inc.’s Web site. Id. *1. Buy.com contended the rebate was offered by the product manufacturer, and it was therefore not responsible for compensating Kershenbaum. Id.

The Court of Appeal held that the trial court erred in denying the motion for class certification:

The different definitions of the proposed class contained in the memorandum of points and authorities and the proposed order did not warrant denial of the motion for lack of ascertainability. Any confusion caused by the different definitions could and should have been remedied by the trial court, either by correcting the proposed order, or by independently drafting a new order.

We further conclude the trial court erred in denying the motion on the ground that common questions of law did not predominate. The California choice-of-law provision in Buy.com’s terms of use agreement applies to the claims asserted by the class. Even if the choice-of-law provision did not apply, class certification was still appropriate because significant contacts with California have been shown to exist, and Buy.com cannot demonstrate that any foreign law, rather than California law, should apply to the class claims.

We also conclude the trial court erred in determining the claims asserted by the class were vague.

Finally, Kershenbaum had standing to assert a claim for misleading advertising; the trial court erred in determining otherwise.

Id.

Background

On February 5, 2007, Kershenbaum purchased a Connect 3D memory card from Buy.com for $30, with a $30 mail-in rebate.  Id. Kershenbaum sent in the appropriate rebate forms, and was approved to receive the $30 rebate.  Id. Connect 3D, however, failed to pay the rebate, but in July 2007, Buy.com offered those customers who had not received their rebates a $10 gift certificate. Id. Kershenbaum filed a class action lawsuit against Buy.com, alleging causes of action against Buy.com for violations of the unfair competition law (Bus. & Prof.Code, § 17200 et seq.) (UCL) and the Consumers Legal Remedies Act (Civ.Code, § 1750 et seq.) (CLRA), and for negligent misrepresentation. Id.

The trial court denied Kershenbaum’s renewed motion for class certification:

a. Plaintiff presented the Court with three different definitions of the class. There are two differing definitions in the Points and Authorities … and there is a third definition in the Proposed Order. Therefore, Plaintiff has not proven that there is an ascertainable class.

b. Additionally, it is vague as to what claims Plaintiff asserts against Buy.com: the failure of Buy.com to perform ‘due diligence’ as to Connect 3D’s financial condition, or misleading advertising.

c. If Plaintiff is asserting ‘misleading advertising,’ i[t] appears the proposed class representative lacks standing, in that he testified he did not rely on any of Buy.com’s representations or omissions before purchasing the Connect 3D rebated products.

d. Plaintiff has not established that common issues of law predominate.

Id.

Ascertainability

The trial court found the class was not ascertainable because Kershenbaum had offered multiple definitions of the class in his motion papers.  Id. *2.  The Court of Appeal noted that the “representative plaintiff need not identify the individual members of the class at the class certification stage in order for the class members to be bound by the judgment. [Citation.] As long as the potential class members may be identified without unreasonable expense or time and given notice of the litigation, and the proposed class definition offers an objective means of identifying those persons who will be bound by the results of the litigation, the ascertainability requirement is met.” Id. *3 (citing Medrazo v. Honda of North Hollywood, 166 Cal. App. 4th 89, 101 (2008)).  Plaintiff argued that even if the class was not adequately defined, the trial court had the discretion to redefine the class.  Id. The Court of Appeal Agreed:

Although Kershenbaum does not state it explicitly, presumably he means to argue that the trial court should have removed the reference to Hannspree products from the class definition in the proposed order.

We agree with Kershenbaum that the class was defined in the memorandum of points and authorities and the court’s reason for denying the motion was legally erroneous. The trial court did not find anything in that definition that made the class unascertainable. If the definition of the class contained in the proposed order did not match that in the memorandum of points and authorities, the trial court could have deleted the Hannspree reference from the proposed order, directed the prevailing party to draft an order consistent with the court’s ruling, or drafted its own order. In failing to do so, and instead denying the renewed motion for class certification for an improper reason, the court erred.

Id.

Predominance of Common Questions

The trial court also denied the motion for class certification on the ground that Kershenbaum had failed to establish common issues of law predominate. Id. *4.  Buy.com contended that because the class members are residents of all 50 states, and California law regarding consumer protection claims differs materially from the laws of other states, differences in the law to be applied to the UCL and CLRA claims will “swamp” the common issues, making class certification inappropriate. Id. The Court of Appeal found that California law applied and that common questions predominated:

The California choice-of-law provision in Buy.com’s terms of use agreement applies in this case. California has a substantial relationship to the parties and the transaction; Buy.com is based in California, and all the transactions in question were processed by Buy.com. Additionally, no other state has a materially greater interest than California in the resolution of this case.

Id. *5.

Here, Buy.com is headquartered in California. The allegedly misleading rebate information on Buy.com’s Web site originated from California. The due diligence Buy.com allegedly failed to perform would have been performed in California. This state has a clear connection to the claims asserted by Kershenbaum. Although there are differences between the consumer protection laws of California and those of other states, those differences generally favor the consumers, and Buy.com cannot explain why another state would object to having California provide greater protection to its citizens against alleged wrongdoing by a California defendant.

Under Wershba and Clothesrigger, Inc. v. GTE Corp., even if the California choice-of-law provision in Buy.com’s terms of use agreement did not apply, the trial court erred in finding common issues did not predominate.

Id. *7

Vagueness of Claims

The trial court also denied Kershenbaum’s motion for class certification because “it is vague as to what claims Plaintiff asserts against Buy.com: the failure of Buy.com to perform ‘due diligence’ as to Connect 3D’s financial condition, or misleading advertising.” Id. *7.  Kershenbaum argued that this was a false dichotomy: “Appellant’s claim is that Buy.com performed inadequate due diligence, and as a result, it advertise[d] that rebates were available when they were not–and that advertising was, in fact, misleading (indeed, it was utterly false, since no one in the putative class was paid their rebates).” Id. The Court sided with plaintiff:

Although Kershenbaum’s pleadings could have been clearer, his allegations were not so vague as to warrant denial of his motion for class certification. Accordingly, we conclude the trial court erred in denying the class certification motion on the ground that it was vague whether Kershenbaum was arguing that Buy.com failed to conduct due diligence on Connect 3D, or that Buy.com’s Web site stating Connect 3D’s products were free after the rebate was misleading advertising. In essence, Kershenbaum alleged the advertising of a free rebate was misleading.”

Id. *8.

Standing of Proposed Class Representative for Misleading Advertising Claim

The trial court also found that Kershenbaum did not have standing to assert a claim for misleading advertising: “If Plaintiff is asserting ‘misleading advertising,’ i[t] appears the proposed class representative lacks standing, in that he testified he did not rely on any of Buy.com’s representations or omissions before purchasing the Connect 3D rebated products.” Id. *8.  Kershenbaum testified at deposition that he believed an online retailer should always be responsible for paying the advertised rebate on products it sells through its Web site, even if the Web site states the rebate will be provided by the manufacturer, not the online retailer. Id. Buy.com argued that plaintiff did not rely on any misrepresentations or omissions because “[t]here was thus nothing Buy.com could have done to prevent Kershenbaum from thinking that Buy.com was responsible for the Connect 3D rebates, not even if Buy.com had conducted an independent audit or provided an express disclaimer.” Id. The Court of Appeal disagreed:

The misleading advertising Kershenbaum’s complaint alleged is the statement that the Connect 3D products purchased were free after the rebate, when in fact a rebate was not available. Kershenbaum has standing to assert such a claim, and the trial court erred in determining otherwise.

Judges and Attorneys

Associate Justice Richard D. Fybel wrote the opinion for the court.  Associate Justices Kathleen O’Leary and Raymond J. Ikola concurred.

Appeal from an order of Judge Gail Andrea Andler of the Orange County Superior Court.

Brodsky & Smith, Evan J. Smith; David P. Meyer & Associates Co. and Matthew R. Wilson for Plaintiff and Appellant.

Rutan & Tucker, Michael T. Hornak, Lisa N. Neal and Zack Broslavsky for Defendant and Respondent.

By CHARLES JUNG