Litigation: The precarious relationship between class actions and small claims courts

Companies seeking to defeat class certification may learn the principle of unintended consequences

Within a month, the 9th Circuit denied class certification when it refused to presume that an entire class relied on a product’s advertisements, but a small claims court awarded an individual plaintiff nearly $10,000 after she opted out of a similar class action. The two outcomes illustrate the effect of companies’ pleas for case-by-case relief: Consumers may heed recent decisions in Mazza and Wal-Mart and seek individual adjudication, but if they keep winning awards that are faster and more lucrative than a class action coupon, class settlement hearings may see more pushback from courts and objections by attorneys general.

In Mazza v. American Honda Motor Company, Inc., No. 09-55376 (9th Cir. Jan. 12, 2012), the 9th Circuit resisted recent trends when it refused to presume class-wide reliance. Though the California Supreme Court’s much-discussed holding in Tobacco II allowed a presumption that unnamed class members relied on misleading advertisements in making their purchases, the 9th Circuit found Mazza’s class overbroad because it was “unreasonable to assume that all class members” viewed Honda’s limited advertising campaign.

The product in question was Honda’s Collision Mitigation Braking System (CMBS). The CMBS, sold as a $4,000 add-on to the Acura RL, was advertised as a means to avoid rear-end collisions and minimize their consequences. Honda promoted the CMBS with a product brochure, magazine advertisements and two television commercials—the first running for a week in November 2005 and the second from February to September 2006. Acura RL owners Michael and Janet Mazza, on behalf of the class, brought claims of misrepresentation and false advertising under California’s Unfair Competition Law (UCL), False Advertising Law (FAL) and the Consumer Legal Remedies Act (CLRA).

The 9th Circuit refused to presume class-wide reliance because it was likely that many class members never viewed the misleading, but limited, advertisements for the CMBS. The Tobacco II plaintiffs, on the other hand, were exposed to a “decades-long tobacco advertising campaign.”

The court also pointed out that Honda’s advertising materials did not deny that the CMBS had limitations. Because the case demanded an individual inquiry into whether each member relied on Honda’s misrepresentations in purchasing the Acura RL, common issues of fact did not predominate and certification was denied.

Perhaps signaling a way forward amidst California’s ever-changing “reliance” landscape, the 9th Circuit noted that “[i]n the absence of the kind of massive advertising campaign at issue in Tobacco II, the relevant class must be defined in such a way as to include only members who were exposed to advertising that is alleged to be materially misleading.” Class members who learned of the alleged CMBS limitations before purchase, the court said, also should have been excluded.

While Mazza garnered headlines, a Torrance, Calif., small claims judge awarded nearly $10,000 to the owner of a Civic Hybrid for Honda’s misrepresentations of the car’s gas mileage capabilities. The owner, Heather Peters, had opted out of a class that is suing Honda in California on the same grounds. An attorney, Peters simply claimed that Honda “fraudulently” represented gas mileage, hybrid performance and the need for a software update. Since a small claims ruling is not limited to the plaintiff’s pleadings, the judge identified seven potential theories of relief, including claims under the CLRA, FAL and UCL.

While the CLRA claim was facially barred due to Peters’ failure to give Honda 30 days’ presuit notice, and the FAL claim did not allow for monetary damages, the judge found that Honda violated the UCL for its misleading representations of the Civic Hybrid’s gas mileage. The court also found that Honda had committed negligent misrepresentation. Damages included the difference in fuel cost, lost fuel cost, diminution in value and the loss of future fuel costs.

In his decision, the judge noted it was “quite clear” that Peters was motivated by a desire to influence class members to opt out of the ongoing Civic Hybrid class action, and had even created a website to that end. Because it is difficult to imagine the class action awarding $10,000 to each class member, Peters has made a compelling case for her campaign.

The two outcomes, then, illustrate what happens when a court grants a company’s request for case-by-case inquiries into reliance: Certification will be denied, but small claims courts may get quite busy awarding damages that may threaten current assumptions about the adequacy of class settlements.

Contributing Author

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Donna Wilson

Donna L. Wilson is a partner in the Los Angeles office of BuckleySandler LLP where she leads the firm’s West Coast litigation practice, with a...

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