205 F.Supp.3d 723
D.S.C.2016Background
- Plaintiffs filed a putative class action alleging Sam’s Club breached its "200% Freshness Guarantee" in the Membership Agreement and asserted breach of contract, injunctive/declaratory relief, and a SCUTPA claim.
- Plaintiffs sought to represent a South Carolina subclass under the South Carolina Unfair Trade Practices Act (SCUTPA), S.C. Code § 39-5-10 et seq.
- Defendants moved to dismiss the SCUTPA claim to the extent it was asserted in a representative (class) capacity, arguing SCUTPA forbids private representative suits.
- SCUTPA § 39-5-140(a) provides a private right to recover actual damages "individually, but not in a representative capacity."
- Plaintiffs relied on Shady Grove and the Eleventh Circuit’s Lisk decision to argue Federal Rule of Civil Procedure 23 permits federal-class treatment despite the state statute.
- The court concluded SCUTPA’s ban on representative suits is so intertwined with the substantive right that Rule 23 cannot displace it and dismissed the representative SCUTPA claim; individual SCUTPA claims remain viable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 23 allows a federal-class action under SCUTPA despite § 39-5-140(a)'s ban on representative suits | Shady Grove (and Lisk) mean Rule 23 governs in federal diversity cases, so the state prohibition is preempted and class treatment is permitted | SCUTPA's text bars representative suits and that prohibition is intertwined with the substantive right, so Rule 23 cannot override it | Court held SCUTPA's ban on representative actions controls; representative SCUTPA claims dismissed |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: factual allegations must state a plausible claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaints)
- Gunnells v. Healthplan Servs., 348 F.3d 417 (4th Cir. 2003) (acknowledging SCUTPA class-action prohibition in certification context)
- Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010) (plurality/concurrence split on whether Rule 23 displaces state class-action prohibitions in diversity suits)
- Lisk v. Lumber One Wood Preserving, LLC, 792 F.3d 1331 (11th Cir. 2015) (held Rule 23 permitted class claims under comparable state consumer-protection statute)