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Article: March 2013 Class Action Litigation Update

March 01, 2013
Business Litigation Reports

Defeating Nationwide Class Actions: Mind Your Burden or Get Burned.
Last year, the Ninth Circuit issued a decision that many interpreted as a death-knell for multistate consumer class actions. In Mazza v. American Honda Motor Co., the Ninth Circuit decertified a class of automobile buyers in a false advertising lawsuit, based in part on the finding that differences in state laws precluded certification of a nationwide class.

The underlying Mazza suit alleged that Honda violated California law by disseminating advertisements that misrepresented the Collision Mitigating Braking System sold with certain Acura automobiles by concealing information about the limitations of that system. The district court certified a nationwide consumer class, concluding that California law could apply to all class members because Honda had failed to show how differences in the various states’ laws were material, that other states had an interest in applying their own laws, or how those interests were implicated. The district court further concluded that California, which was the forum state and the headquarters of Honda’s U.S. operations, had sufficient contacts to the claims to ensure application of California law would not be arbitrary or unfair to nonresident class members.

On appeal, the Ninth Circuit reversed. Pointing to varying scienter and reliance requirements, the court held that such differences “are not trivial or wholly immaterial,” because these elements “will spell the difference between the success and failure of the claim.” The Ninth Circuit further held that the district court failed to consider adequately the interests of other states in having their consumer protection laws applied to claims brought on behalf of their residents, and erroneously concluded that California’s interests in having its law applied outweighed the interests of states with different consumer protection laws.

Following Mazza, it initially appeared that the decision precluded nationwide consumer classes as a matter of law. For example, in Kowalsky v. Hewlett-Packard Co., a purported nationwide class involving the marketing of allegedly defective printers, the court denied certification of a nationwide class, concluding that “Mazza controls and forecloses the certification of the proposed nationwide class.” Other district courts reached similar conclusions.

However, one district court recently issued a sobering reminder that Mazza did not establish a per se rule, and that the defendant still retains the burden to show that application of a single state’s law would be inappropriate under the governing choice-of-law rules. Specifically, a Central District of California court ruled in In re POM Wonderful LLC Marketing and Sales Practices Litigation, that a nationwide class was appropriate because the defendant had failed to demonstrate potentially outcome-determinative differences among the various states’ consumer protection laws.

The plaintiffs in POM Wonderful alleged that Pom misleadingly claimed that its juice products provide certain health-related benefits. Relying on Mazza, the defendant argued that California law could not apply to consumers nationwide. It supported this contention with a chart that summarized each state’s consumer protection laws, including elements such as scienter, reliance and limitations periods, as well as remedies and defenses. The POM Wonderful court found this showing insufficient, and distinguished Mazza because the defendant there had “met its burden to demonstrate material differences in state law and show that other states’ interests outweighed California’s.” In contrast, the district court held that “nowhere does Pom apply the facts of this case to those laws or attempt to demonstrate, beyond citation to Mazza, that a true conflict exists,” and thus failed to carry its burden with respect to California’s choice-of-law analysis.

Thus, POM Wonderful illustrates the important lesson that Mazza did not banish multistate classes as a matter of law. Rather, to benefit from Mazza, a defendant must adequately explain why the particular claims at issue are inappropriate for nationwide treatment under governing choice-of-law principles.