Category: Class Action Defense

Third Circuit Holds Agreement to Arbitrate in Illusory Forum Is Unenforceable

Third Circuit Holds Agreement to Arbitrate in Illusory Forum Is Unenforceable

The Third Circuit Court of Appeals recently held, in a precedential decision, that when parties enter an agreement directing them to arbitrate in an illusory forum, the forum selection clause is not severable and the entire agreement to arbitrate is unenforceable. In MacDonald v. CashCall, Inc. et al., a plaintiff brought suit on behalf of himself and a putative class, alleging a loan agreement between the parties was unconscionable and usurious. The agreement at issue included “(1) a provision requiring that all disputes be resolved through arbitration conducted by a representative of the Cheyenne River Sioux Tribe (‘CRST’) and (2) a clause that delegates questions about the arbitration provision’s enforceability to the arbitrator.” The defendants moved to compel arbitration. The district court declined to compel arbitration because the agreement at issue expressly disavowed federal and state law, thus rendering the arbitration provisions invalid as an impermissible prospective waiver of federal and state statutory rights. The district court further held that the arbitration agreement was unenforceable because the forum was illusory, as the selected forum did not conduct arbitrations or have rules for conducting arbitrations. The Third Circuit affirmed the district court’s conclusion that the loan agreement’s arbitration provision cannot direct...

In Defective Shingles Class Action, Third Circuit Rejects Novel “Expected Useful Life” Defect Theory Premised on Warranty Period

In Defective Shingles Class Action, Third Circuit Rejects Novel “Expected Useful Life” Defect Theory Premised on Warranty Period

The Third Circuit recently confirmed that plaintiffs must provide evidence of a specific defect, capable of classwide proof, in order to prevail on proposed class claims, holding that, where defective design is “an essential element of Plaintiffs’ misrepresentation-based claims,” whether proof of the defect “is susceptible to classwide evidence is dispositive of whether Plaintiffs can satisfy predominance” under Rule 23(b)(3). In Gonzalez v. Owens Corning, the plaintiffs sued the manufacturer of Oakridge fiberglass roofing shingles, claiming that their shingles, which were subject to warranties of 25 years or more, were “plagued by design flaws that result in cracking, curling and degranulation” and “will eventually fail.” The plaintiffs argued that the product warranties amounted to representations about the shingles’ expected useful life. Plaintiffs did not dispute that the design specifications for all shingles met the applicable industry design standard (“ASTM”), but claimed that compliance with the ASTM specifications did not consistently yield shingles that would last the stated warranty period. Thus, plaintiffs claimed that the issue of “defectiveness should be judged by the expected useful life of the shingles as represented by the applicable warranty period.” The plaintiffs’ expert, whose testimony was largely stricken as unreliable under Daubert, acknowledged that there...

New Jersey Supreme Court’s “Aggrieved Consumer” Ruling Will Erode TCCWNA Class Actions

New Jersey Supreme Court’s “Aggrieved Consumer” Ruling Will Erode TCCWNA Class Actions

The New Jersey Supreme Court’s April 16, 2018 decision in Spade v. Select Comfort (consolidated with Wenger v. Bob’s Discount Furniture, LLC), entirely destroys the viability of “no injury” class actions under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) and will also surely erode the viability of TCCWNA class certification more broadly. Via referred questions from the Third Circuit Court of Appeals, the N.J. Supreme Court held that in order to be an “aggrieved consumer” under the TCCWNA, a plaintiff must demonstrate an adverse consequence caused by an unlawful provision in a consumer contract or other writing. The TCCWNA essentially prohibits businesses from including in any written consumer contract, warranty, or sign any provision that “violates any clearly established legal right of a consumer or responsibility of a seller” or other business. N.J.S.A. § 56:12-15. Although the TCCWNA on its face appears to only allow an “aggrieved consumer” to sue to recover a “civil penalty” of not less than $100 or actual damages, this Statute has been used—some might say abused—with increasing frequency by the plaintiff class action bar to bring “no injury” class actions premised solely upon the existence of a contract containing some unenforceable or...

TCPA Update: When Revocation of Consent Is Unreasonable

TCPA Update: When Revocation of Consent Is Unreasonable

The District of New Jersey recently made clear that when attempting to cancel unwanted commercial text messages, if the recipient does not follow the sender’s simple instructions, any other attempts to revoke consent to the text messages may be found unreasonable. In Rando v. Edible Arrangements International, LLC, a class action lawsuit claiming violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, et seq., plaintiff claimed that she was sent commercial text messages from defendant using an automatic telephone dialing system (“ATDS”). Though plaintiff had originally consented to receive such text messages, and never followed defendant’s instruction to text “STOP to cancel,” the complaint alleged that plaintiff had revoked her consent to receive the messages via other return text messages of varying content and that defendant had impermissibly designated an exclusive means for the revocation of consent.” The Rando court held that the complaint failed to state a TCPA claim by failing to allege that the plaintiff’s chosen method of revoking consent was reasonable. Plaintiff had replied to the text with language which would clearly indicate to a human being that she wanted to revoke her consent, but she did not text back “STOP” as instructed in...

D.C. Circuit’s Rejection of FCC’s 2015 “Autodialer” Definition is Welcome News for Businesses in TCPA Class Actions

D.C. Circuit’s Rejection of FCC’s 2015 “Autodialer” Definition is Welcome News for Businesses in TCPA Class Actions

On March 16, 2018, the D.C. Circuit Court of Appeals issued a long awaited decision in its review of the Federal Communications Commission’s (FCC) 2015 Declaratory Ruling and Order, which among other things, had sought to clarify various aspects of the Telephone Consumer Protection Act’s (TCPA) general bar against using automated dialing devices (ATDS) to make uninvited calls or texts messages. The FCC’s 2015 Order was largely viewed by businesses as having greatly expanded the scope of the TCPA, opening the floodgates of class action litigation against businesses utilizing virtually any type of text messaging to communicate ads to customers. In ACA International v. FCC, the D.C. Circuit, among other things, struck down the Commission’s broad definition of autodialer. The TCPA generally makes it unlawful to call a cell phone using an ATDS, i.e., “equipment which has the capacity-(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Id. § 227(a)(1). The FCC’s 2015 Order declined to define a device’s “capacity” in a manner confined to its “present capacity,” but rather, construed a device’s “capacity” to encompass its “potential functionalities” with modifications such as software changes. Thus,...

Plaintiffs No Longer Need a “Nexus” to Pennsylvania in Order to Bring Claims Under the Unfair Trade Practices and Consumer Protection Law

Plaintiffs No Longer Need a “Nexus” to Pennsylvania in Order to Bring Claims Under the Unfair Trade Practices and Consumer Protection Law

In answering a certified question from the Third Circuit, the Pennsylvania Supreme Court recently issued a decision that greatly expands the reach of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL). In Danganan v. Guardian Protection Services, the Supreme Court held that “a non-Pennsylvania resident may bring suit under the UTPCPL against a [Pennsylvania]-headquartered business based on transactions that occurred out-of-state.” Plaintiff Danganan contracted with Guardian Protection Services (“Guardian”), a Pennsylvania-headquartered business, for home security equipment and services at the plaintiff’s then-home in Washington, DC. The contract contained, inter alia, a choice-of-law provision, stating that the “Agreement shall be governed by the laws of Pennsylvania.” After moving to California, the plaintiff attempted to cancel the agreement, but Guardian continued to bill the plaintiff, claiming the agreement authorized ongoing charges through the contract’s term, regardless of cancellation attempts. The plaintiff brought suit in Pennsylvania state court, and Guardian removed the matter to the United States District Court for the Western District of Pennsylvania. Guardian then moved to dismiss, arguing that the plaintiff had not, pursuant to the UTPCPL, demonstrated a “sufficient nexus” between Pennsylvania and the improper conduct alleged in the complaint. The district court agreed and dismissed the complaint....

Ninth Circuit Reverses $200 Million Settlement and Class Certification For Lack of Proper Choice of Law Analysis

Ninth Circuit Reverses $200 Million Settlement and Class Certification For Lack of Proper Choice of Law Analysis

In a decision that may make it harder to settle cases on behalf of nationwide classes, the Ninth Circuit recently overturned a $200 million class action settlement and vacated the certification of a nationwide class of consumers, finding the district court failed to examine whether different states’ laws applied to the class members’ claims and whether Rule 23’s predominance requirement was satisfied. The dispute was rooted in a 2012 investigation which found that Hyundai and Kia deviated from U.S. Environmental Protection Agency fuel economy testing protocols and overstated the fuel efficiency estimates in advertisements and car window stickers for certain 2011, 2012, and 2013 vehicles. A California federal court approved the settlement in June 2015. However, in In re Hyundai and Kia Fuel Economy Litigation, a split three-judge panel of the Ninth Circuit vacated the District Court’s approval order and certification of a nationwide class of consumers. Five objectors appealed from the class settlement arguing, among other things, that the settlement violated consumer rights in states other than California. The Ninth Circuit held that the District Court erred by failing to apply California’s choice of law rules to determine whether California law could apply to all plaintiffs in a nationwide class...

Class Certification Denied in Tropicana Orange Juice Labeling MDL

Class Certification Denied in Tropicana Orange Juice Labeling MDL

In the Tropicana Orange Juice multidistrict litigation (MDL), plaintiffs’ bid for class certification has been rejected due to the need for individualized proofs and inability to ascertain class members. On January 22, 2018, U.S. District Judge William J. Martini (DNJ) denied class certification in the multidistrict litigation, In re Tropicana Orange Juice Marketing and Sales Practices Litigation. The lawsuit claimed that “Tropicana Pure Premium” (TPP) orange juice was mislabeled and misbranded as “100% pure and natural” because the juice contains undisclosed natural flavoring in violation of FDA standards of identity for pasteurized orange juice. Plaintiffs also attacked the marketing of TPP as “pure, natural and fresh from the grove” as demonstrably false given the added flavoring. The MDL judge, however, concluded that plaintiffs’ common law and N.J. Consumer Fraud Act (“CFA”) claims were “plainly unsuitable for class certification” because each claim “requires individualized proof.” Plaintiffs argued that their unjust enrichment claim was uniform because it focused on the TPP label and consumers uniformly paid for pasteurized orange juice that they did not receive. But the court held that defendant would be unjustly enriched only if a consumer did not receive the benefit of the bargain for which she paid, thus...

Class Certification of TCCWNA Claims Dealt a Serious Blow by NJ Supreme Court in Dugan v. TGI Fridays and Bozzi v. Restaurant Partners, LLC

Class Certification of TCCWNA Claims Dealt a Serious Blow by NJ Supreme Court in Dugan v. TGI Fridays and Bozzi v. Restaurant Partners, LLC

On October 4, 2017, the Supreme Court of New Jersey dealt a subtle but serious blow to “no injury” TCCWNA class actions. In consolidated appeals, Dugan v. TGI Fridays and Bozzi v. Restaurant Partners, LLC, the plaintiffs had argued that the defendant restaurant operators violated the plaintiffs’ clearly established rights by failing to list prices for beverages on their menus, that the restaurants were required to plainly mark the prices, and that when the restaurants’ employees presented menus to customers (class members), they “offered” contracts that violated the New Jersey Consumer Fraud Act (“CFA”) and the Truth-in Consumer Contract, Warranty and Notice Act (“TCCWNA”). However, the Court concluded that class certification was not appropriate because individual, rather than common, issues would predominate in proving TCCWNA’s “aggrieved consumer” and “clearly established legal right” requirements. The fundamental take-away from the Supreme Court’s analysis of TCCWNA’s “aggrieved consumer” requirement is that simply demonstrating that a consumer contract offends TCCWNA does not establish liability under the Act, because “[b]y its very terms, TCCWNA . . . does not apply when a defendant fails to provide the consumer with a required writing.” Rather, “at a minimum, a claimant must prove that he or she was...

Dos and Don’ts for Online Retailers Listing Terms and Conditions on Their Websites

Dos and Don’ts for Online Retailers Listing Terms and Conditions on Their Websites

A recent California federal decision states clear guidelines for consumer-focused companies’ online terms and conditions. In McKee v. Audible, Inc., the plaintiff signed up on his smartphone for a free one-month trial with Audible, an Amazon subsidiary offering audiobook subscription services. Thereafter, the plaintiff filed a putative class action against Audible and Amazon.com taking issue with Audible’s policy regarding unused credits. Defendants then filed a motion to compel arbitration. The motion to compel arbitration was granted as to Amazon, but denied as to Audible. The court found that while both companies’ arbitration agreements were valid and enforceable, Audible’s customer user agreements were not clearly displayed when consumers signed up for the service online and were blocked by certain images when using the Audible app. Therefore, customers were not given the requisite actual or constructive notices of the terms of service, such that they could mutually assent to the terms of service in order to create a valid and enforceable contract. The court offered the following guidelines for constructive notice in internet commerce: (1) “terms of use” will not be enforced where there is no evidence that the website user had notice of the agreement; (2) a user should be encouraged...