Postpichal v. Cricket Wireless, LLC: Under RICO, Differences in Consumers’ Experience Purchasing 4G Cell Phones and Plans Does Not Defeat Predominance

RSS Feed

“In the early 2010’s, 4G ranked as the newest development in the cellular services industry.” Postpichal v. Cricket Wireless, LLC, No. C 19-07270 WHA (N.D. Cal. Aug. 4, 2021) (“Postpichal”) (slip op. at 1, available here). “Cellular service companies needed 4G to stay current.” Id. at 2. According to the plaintiffs in Postpichal, Cricket Wireless, LLC (“Cricket”) failed to build out its 4G capabilities. Up to 77% of individuals living in areas of Cricket’s coverage did not have access to 4G. Id. Cricket deceptively advertised and sold 4G cellular phones and service plans in those areas anyway, according to the plaintiffs’ class action complaint.  

The plaintiffs moved for class certification on a single claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Slip op. at 7. One of the defendant’s primary arguments was that the plaintiffs could not establish commonality and predominance under Federal Rule of Civil Procedure, Rule 23(b)(3). Id. at 11. The defendant argued that there were “differences in marketing materials across different regions, unscripted conversations between employees and customers,” and issues as to “whether or not customers viewed coverage maps.” Id.

Under RICO, those differences did not defeat predominance, said the district court, because RICO plaintiffs do not need to prove first-party reliance. They “need to prove proximate cause and that in most cases requires reliance by someone.”Slip op. at 11 (emphasis in original). In other words, it would suffice if the plaintiffs proved that, while not everyone relied on the defendant’s fraudulent marketing scheme, a “critical mass” of consumers did, such that the defendant’s representations as to 4G “artificially support[ed] a higher price for both phones and plans.” Id. In that case, all class members will have paid more for their phones and plans than they should have because they purchased 4G phones and plans supposedly worth more than they actually were. Id.

The defendant also attempted to defeat commonality and reliance by likening Postpichal to another RICO case, Poulos v. Caesars World, Inc., 379 F.3d 654 (9th Cir. 2004). In Poulos, a cruise ship allegedly offered patrons video poker machines programmed to show near misses of a winning jackpot more often than they would appear on a truly random machine, creating the misperception of higher-than-actual odds of winning. Insidious as that practice may seem, the Ninth Circuit held that the plaintiffs failed to show proximate cause because people have “varying reasons” for gambling. Slip op. at 13. “[I]t may be an addiction, a form of escape, a casual endeavor, a hobby, a risk-taking money venture, or scores of other things.” Id. at 13, quoting Poulos at 668.  

The district court was not persuaded by the defendant’s reliance on Poulos. “This order declines Cricket’s invitation to treat cellular service plans and phones like gambling.” Slip op. at 13. Consumers do not purchase cell phones and plans for the thrill of betting that they get the service for which they paid. Rather, although consumers buy cell phones and plans for different reasons, “most reasonable consumers don’t pay more for nothing if given options.” Id. In obfuscating the true availability of 4G in most markets, the defendant deprived consumers of the option of making “informed choices about their purchases.” Id. Thus, the plaintiffs established commonality and predominance under RICO.

Authored by:
Robert Friedl, Senior Counsel