Judge Whyte of the Northern District Certifies Class Action Against Dell Related to Alleged Misrepresentation of Discount
The Northern District granted in part a class certification motion in Brazil v. Dell Inc., No. C-07-01700 RMW, 2010 WL 5387831 (N.D. Cal. Dec. 21, 2010) (slip op.).
On June 15, 2006, plaintiff Steven Seick purchased directly from defendant Dell Inc. (“Dell”) through its online purchasing process a Dell Dimension B 110 desktop computer (“Dimension Desktop”) and some associated peripheral Dell products. Id. *1. Dell allegedly misrepresented to Seick that the base price of the Dimension Desktop reflected a $50 savings from Dell’s regular price for that computer, but during the three months prior to Seick’s purchase, Dell’s average offered sales price for the Dimension Desktop model was allegedly even lower than the amount paid by Seick. Id. Consequently, rather than having received any discount, Seick asserts that he paid $1.49 in excess of the true regular sales price for the Dimension Desktop. Id. In addition, although Dell represented to Seick that the offer for the $50 savings would expire on June 22, 2006, Dell in fact continued to make the offer until October 12, 2006. Id. Plaintiff Chad Brazil made similar, but not entirely the same allegations. Id.
Brazil and Seick brought a class action claiming that Dell deceives customers by creating the illusion of discounts and savings through false discounts from false former prices. Id. Former prices purportedly mislead purchasers when products have not been sold at non-marked down or “regular” prices with sufficient regularity. Id.
Plaintiffs in their First Amended Complaint alleged various common law claims, claims under California Bus. & Profs. Code sections 17500 and 17200, et seq., and claims under Cal. Civ.Code section 1750, et seq. Id. After several motions to dismiss, motions to strike, and amendments to the complaint, plaintiff’ moved to certify the class alleging claims under California law. Id. *2.
Plaintiffs offered the following proposed class definition: “All persons or entities who are citizens of the State of California who on or after March 23, 2003, purchased via Dell’s Web site Dell-branded products advertised with a represented former sales price (i.e., a “Slash-Thru” price or a “Starting Price”) as indicated and set forth [in attached schedules, with limited exclusions].” Id.
Dell objected to the adequacy of plaintiffs as class representatives to the extent that plaintiffs’ deposition testimony undermined their alleged reliance. Id. But the court found that plaintiffs have presented evidence that at least preliminarily demonstrates they relied on the alleged misrepresentations. Id. Seick testified that he probably would not have bought the computer when he bought it if not for the allegedly false promotion, and Brazil testified that the sale price was important to him. Id. Thus, the court concluded that “Plaintiffs are adequate representatives within the meaning of the Rule.” Id.
The court noted that “a class representative must be part of the class and possess the same interest and suffer the same injury as the class members.” Id. *3. (citing Amchen Products, Inc. v. Windsor, 521 U.S. 591, 625-26 (1997)).
Plaintiffs sought to represent Dell customers who purchased through Dell’s web site Dell-branded products “advertised with a represented former sales price (i.e., a “Slash-Thru” price or a “Starting Price”). Id. Plaintiffs contend that in moving from “Slash-Thru” pricing to “Starting Price” promotions in mid-2007, Dell “slightly modified, but did not materially change, its representations.” The court observed, however, that the “Starting Price” promotions appeared to present significantly different factual and legal issues. Id. Thus, the court concluded that Plaintiffs failed to satisfy the typicality requirement with respect to these later purchases, and that claims arising from such purchases cannot be certified as part of the class. Id. The court further distinguished purchases made through the Small & Medium Business (“SMB”) segments of Dell’s website from home or home office purchases. Id. *4. A “purchaser of a large number of computers for a business, or even the purchaser of a single $20,000 commercial server, is unlikely to have a substantially similar purchasing experience as the purchaser of a single laptop for personal use.” Id. The court found that “it would be difficult to make the same inference of reliance regarding the relevant offers and alleged falsity in the context of Dell’s SMB segment.” Id. Thus the court narrowed the class, ruling that “Claims arising from purchases through Dell’s SMB segment cannot be certified as part of plaintiffs’ class.” Id.
Rule 23(b)(3) Class: Predominance
Citing the Ninth Circuit’s recent decision in Dukes v. Wal-Mart Stores, Inc., 603 F. 3d 571, 593 (9th Cir. 2010), the court explained that “Rule 23(b)(3) requires a district court to formulate some prediction as to how specific issues will play out in order to determine whether common or individual issues predominate in a given case.” Id. *4. The court reasoned:
In order to prevail on their claims, plaintiffs must prove falsity; to meet Rule 23(b)(3)’s predominance requirement, they must do so through common evidence. Plaintiffs must also prove reliance in order to prevail on most of its claims, including negligent misrepresentation, intentional misrepresentation/ fraud, and various Unfair Competition Law/False Advertising Law claims. Because reliance plays such a central role in plaintiffs’ case, to meet Rule 23(b)(3)’s predominance requirement, plaintiffs must be able to prove reliance with common evidence.
Plaintiffs’ Common Evidence of Falsity
The court reasoned that the “case turns on whether the represented former prices listed at the point of sale on Dell’s website in the form of “Slash-Thru” prices were false and misleading.” Id. *5. Dell contended that determining falsity requires an extensive, detailed inquiry into each and every offer at issue in this case. Id. But the court disagreed.
Unlike Mahfood v. QVC, Inc., 2008 WL 5381088 (C.D.Cal. Sep. 22, 2008), which involved discounts specifically represented as lower than market value, the claims in this case turn on discounts allegedly from Dell’s previously offered prices. Whether these representations were false is susceptible to common proof in the form of Dell’s pricing histories, as well as through testimony from Dell’s employees about the pricing policies.
Plaintiffs’ Common Evidence of Reliance
Citing In re Tobacco II Cases, 466 Cal. 4th 298, 397 (2009), the court stated that in California, “a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material”. Id. “Materiality is an objective standard” and it is “susceptible to common proof in this case.” Id.
There was no dispute that the alleged misrepresentations were communicated to all class members, because the representations were made at the point of sale as part of a standardized online purchasing process. Id.
The court found that plaintiff’s common evidence was sufficient to show that the representations were material to plaintiffs. Id. The court also found that there was evidence that Dell considered the representations material, and that external reference prices and semantic clues impact customers’ perceptions of value and purchase decisions. Id.
While Dell’s marketing expert contended that while some purchasers may attach importance to a discount off Dell’s list price, others will base their decision on wholly unrelated factors. Id. The court rejected this contention: “under California law, plaintiffs need not establish that each and every class member based his or her decision on the represented discounts.” Id. The court concluded that Plaintiffs’ common evidence that the representations were material satisfies California’s reliance presumption and Rule 23(b) (3)’s predominance requirement. Id.
Plaintiffs’ Common Evidence of Damages
The court stated the standard as follows: “At class certification, plaintiffs must present a likely method for determining class damages, though it is not necessary to show the methods will work with certainty.” Id. (citing Chavez v. Blue Sky Natural Bev. Co., 2010 U.S. Dist. LEXIS 60554, at *38 (N.D. Cal. Jun. 18, 2010). The court observed that in the present case, “there are challenging questions surrounding both the fact and the amount of any damages” but the court found that “plaintiffs satisfy the standard of plausibility.” Id. “Although the class members bought different products at different prices, the proposed methods of calculating damages are common to the class as a whole.”
Thus, the court granted certification of the following class: “All persons or entities who are citizens of the State of California who on or after March 23, 2003, purchased via the Home & Home Office segment of Dell’s Web site Dell-branded products advertised with a represented former sales price (i.e., a “Slash-Thru” price).”
District Judge Ronald M. Whyte.
By CHARLES JUNG