Articles from June 2012



Keegan v. American Honda: Federal District Court Certifies Class Alleging Tire Defect

Judge Margaret M. Morrow of California’s Central District has certified two classes of Honda Civic owners and lessees alleging that certain model years of the vehicles have a rear-suspension defect that could cause uneven and premature wear on the rear tires.  See Keegan v. American Honda Motor Co., No. 10-cv-09508 (C.D. Cal. June 12, 2012) (Order Granting in Part and Denying in Part Plaintiffs’ Motion for Class Certification) (available here).  Plaintiffs are seeking relief pursuant to California’s Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), Song-Beverly Act, and Commercial Code § 2313, as well as the federal Magnuson-Moss Warranty Act and consumer protection and implied warranty statutes of various other states.  Order at 1.

The certification ruling is notable in that a full Daubert analysis of the plaintiffs’ and defendant’s proffered experts was conducted, and expert testimony that failed to satisfy the Daubert threshold was excluded.  See id. at 9-19.  Though such decisions by a federal district court do not have binding precedential effect, Judge Morrow’s choice to conduct a full Daubert analysis is likely to become more the rule than the exception, particularly after the U.S. Supreme Court, in Wal-Mart v. Dukes, expressed skepticism of a district court’s finding that Daubert does not apply to class certification proceedings. See Wal-Mart v. Dukes, 131 S. Ct. 2541, 2554 (2011).

The Keegan court extensively considered the parties’ opposing views of commonality, concluding that the defendant’s arguments were “based on a misapprehension of what commonality demands.”  Order at 25.  Honda had argued (as many defendants opposing class certification do) that particular differences between class members’ experiences resulted in the predominance of individual issues, and that “proving liability will require determining whether the tire wear each class vehicle suffered was premature or excessive.”  Id. at 25-26.  Judge Morrow disagreed, however, explaining that commonality requires only that class members’ allegations share common issues of law or fact such that all claims for relief will be sufficiently presented, and “[t]he fact that some vehicles have not yet manifested premature or excessive tire wear is not sufficient, standing alone, to defeat commonality.”  Id. at 26.

Keegan is viewed as a major victory for plaintiffs, and will likely be invoked to support certification in other consumer class actions, whether involving automobile defects or otherwise.

Haney v. Recall Center: Federal Court Certifies Class of Two Million in Consumer Privacy Action

A federal court has certified a class of Arkansas drivers alleging that the defendant purchased their personal information from a database maintained by the state, in violation of the Driver’s Privacy Protection Act (DPPA).  See Haney v. Recall Center, No. 10-cv-04003 (W.D. Ark. May 9, 2012) (order on motion to certify class) (available here).  Particularly significant is the size of the certified class, estimated to be two million members.  Order at 5.  This decision runs contrary to widespread speculation that classes with millions of members would be difficult (if not impossible) to certify  post-Wal-Mart v. Dukes.

Haney stands to be a notable case not only due to its sheer size and potentially monumental damages (plaintiffs are seeking $2500 for each violation), but also because the underlying privacy issues have considerable resonance with the mass public, as technology increasingly puts private information at risk.  Further, in redefining the class to comport with the applicable statute of limitations, the court underscored that courts should use their discretion to do so rather than denying class certification on an easily remedied ground.  See id. at 2-3.  The Haney certification order also reasserted the division between consideration of class certification criteria and the underlying merits.  Id. at 3, quoting Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178 (1974) (“In determining whether to certify a class action, ‘the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met.’”).

As to the often-decisive Rule 23 “commonality” requirement, the defendant argued that each transaction in which private data was obtained would require an intrinsically individualized inquiry, in particular as to the affirmative defense that information was acquired for a permissible purpose.  See id. at 6.  The defendant also argued that the DPPA requires that a violation cause actual injury, which would likewise require individual analysis.  Id.  The court rejected both of defendant’s arguments, finding that the DPPA does not require proof of actual damages, and that, although individual answers to questions regarding the data transactions might vary as to each class member, “Rule 23(a) requires common questions, not common answers.” Id. at 6-7.

Hoover v. American Income Life: Court of Appeal Further Limits the Enforceability of Mandatory Arbitration Clauses

California’s Fourth Appellate District has upheld a trial court’s denial of a defendant’s motion to compel arbitration of the plaintiff’s classwide wage-and-hour claims. The three-judge panel held that the defendant had, in failing to assert its arbitration clause for nearly one year, conducting discovery, and lobbying putative class members so as to reduce the size of the class, waived its right to arbitrate. See Hoover v. Amer. Income Life Ins. Co., ___ Cal. App. 4th ___ (2012), available here. The court further found that, even had the defendant not waived arbitration by first litigating the case, the result would be the same, since the lack of an “interstate” component to the plaintiff’s job rendered the FAA inapplicable. Slip op. at 17-18

Perhaps more significant than the court’s refusal to compel arbitration is its interpretation (or lack thereof) of the U.S. Supreme Court’s AT&T Wireless v. Concepcion decision and its reading of California precedent as to the circumstances in which arbitration cannot be compelled. The decision purports to not expressly interpret Concepcion, stating, “[t]he conclusions we reach here avert any dependence . . . on two recent United States Supreme Court opinions, addressing the issue of class arbitrations for antitrust claims and consumer sales contracts.” Slip op. at 3 n.2.

The two “recent cases” are of course Concepcion and Stolt-Nielsen. Yet contrary to the court’s contention that the Hoover decision does not rely on either, that “‘[Concepcion] does not provide that a public right . . . can be waived if such a waiver is contrary to state law’” is perhaps Hoover’s key legal conclusion, a conclusion that is drawn directly from Brown v. Ralphs, the Court of Appeal’s first case interpreting Concepcion. See Hoover at 3 n.2, quoting Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489, 500 (2011).

Though not initially designated for publication in California’s official reporter, Hoover has now been certified for publication. As such, Hoover vividly underscores the opposing and irreconcilable outcomes as to the scope of Concepcion’s application. Compare Brown v. Ralphs, 197 Cal. App. 4th at 489 (PAGA claims not arbitrable) with Iskanian v. CLS Transp. Los Angeles, LLC, ___ Cal. App. 4th ___ (2012) (rejecting Brown v. Ralphs). As trial court and Court of Appeal decisions continue to fall under either the Brown or Iskanian rubric, speculation is rampant that the California Supreme Court will have no choice but to take up and resolve this aspect of Concepcion’s application.

Moreover, Hoover’s citation to and reliance on Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003), for the proposition that a claim for injunctive relief under the Unfair Business Practices Act is not arbitrable (see Hoover at 19), is notable in that in Iskanian, the Second Appellate District had arguably deemed Cruz overruled (see Iskanian slip op. at 16-17). Consequently, Hoover represents further confirmation that the ultimate resolution of Concepcion’s scope will come only with California Supreme Court review.

Myles v. Prosperity Mortgage: Dukes Inapplicable to FLSA Certification

Federal courts continue to interpret last year’s Wal-Mart v. Dukes Supreme Court decision more narrowly than many had expected, surprising those who viewed Dukes (in concert with AT&T v. Concepcion) as a virtual death knell for class actions.  In Myles v. Prosperity Mortgage Co., Judge Catherine C. Blake granted conditional class certification in an action alleging that the defendant misclassified its loan officers as exempt from overtime pay.  See Myles, No. 11-01234 (D. Md. May 31, 2012) (memorandum opinion re: class certification) (available here).  And of greater general significance, the court held that Dukes is inapplicable at the certification stage of an FLSA action.  Id. at 10-11.  Although Dukes did not address FLSA claims, the Myles defendant, Prosperity Mortgage Company (PMC), argued for the application of the more rigorous certification criteria articulated in Dukes, which would result in a radical remaking of the long-established, two-stage FLSA certification process.  Id. at 9-10.  PMC maintained that Dukes applies to “all aggregate claims,” including both class actions and collective FLSA actions. Id. at 9.

After considerable reasoning, however, the Myles court concluded that Dukes not only does not apply to FLSA certification determinations, but is also factually distinguishable from Myles, stating, “Dukes does not mention the FLSA or the two-step certification process, and such a conclusion does not necessarily follow from any particular language in the opinion.”  Id. at 9.  Judge Blake also pointed out that the first stage of FLSA certification requires only “relatively modest” evidence of commonality, in contrast to the far more demanding Dukes criteria.  Id. at 8-9.  Finally, she noted that in Dukes, there was no corporate discriminatory policy common to the class, and the class claims were based on individual, discretionary decisions made by many different managers, whereas in Myles, “PMC has acknowledged that it had an express policy of considering its loan officers to be exempt under the FLSA; thus, no local management discretion is at issue and no individualized inquiry is necessary to determine why individual loan officers were disfavored.”  Id. at 11.

Buttressing its analysis, the court noted that “‘numerous courts . . . have refused to apply Dukes on motions for conditional certification under the FLSA, concluding that the Rule 23 analysis had no place at this stage of the litigation.’”  Id. at 10, citing Winfield v. Citibank, N.A., ¬¬___ F. Supp. 2d ___, 2012 WL 423346 at *10 (S.D.N.Y. Feb. 9, 2012).