Michael MAZZA; Janet Mazza; Deep Kalsi, Plaintiffs-Appellees, v. AMERICAN HONDA MOTOR COMPANY, INC., Defendant-Appellant.
No. 09-55376
United States Court of Appeals, Ninth Circuit
Filed Jan. 12, 2012
666 F.3d 581
Argued and Submitted June 9, 2010. Submission deferred Dec. 7, 2010. Resubmitted June 22, 2011.
Robert Ebert Byrnes, Payam Shahian, Glenn A. Danas, Marc Primo, Initiative Legal Group APC, Los Angeles, CA, Michael Francis Ram, Ram, Olson, Cereghino & Kopczynski, LLP, San Francisco, CA, for the plaintiff-appellees.
Before: D.W. NELSON and RONALD M. GOULD, Circuit Judges, and JAMES S. GWIN, District Judge.*
Opinion by Judge GOULD; Dissent by Judge D.W. NELSON.
OPINION
GOULD, Circuit Judge:
Honda appeals the district court‘s decision to certify a nationwide class of all consumers who purchased or leased Acura RLs equipped with a Collision Mitigation Braking System (“CMBS”) during a 3 year period under
We have jurisdiction pursuant to
I
The CMBS was part of an optional technology package for Honda‘s Acura RL vehicles released in 2005. Honda said that the CMBS detects the proximity of other vehicles, assesses the equipped car‘s speed, and implements a three-stage pro-
In 2006, Honda released a product brochure stating that the CMBS “is designed to help alert the driver of a pending collision or—if it‘s unavoidable—to reduce the severity of impact by automatically applying the brakes if an impending collision is detected.” The brochure described the CMBS system‘s three-step process of alerting, lightly braking, and strongly braking if a crash is imminent:
If the system senses a vehicle, it determines the distance and closing speed. If the closing speed goes above a programmed threshold, the system will immediately alert the driver with an audible alarm and a flashing indicator on the instrument panel. If the driver takes no action to reduce speed, the system will automatically tug at the driver‘s seat belt and lightly apply the brakes. When the system senses that a frontal collision is unavoidable and the driver still takes no action, the front seat belts are retracted tightly and strong braking is applied automatically to lower impact speed and help reduce damage and the severity of injury.
The brochure showed a picture of an Acura behind a truck with three labels. Stage 1 was farthest from the truck and stated “RECOGNITION OF POSSIBLE COLLISION.” Stage 2 was in the middle and stated “BELTS TIGHTEN AND LIGHT BRAKING.” and Stage 3 was nearest the truck and stated “STRONG BRAKING.” The 2007 and 2008 product brochures were similar and were available at dealerships.
Honda also released television commercials describing the system‘s operation. One ran for a week in November 2005 and another ran from February to September 2006. In the 2005 commercial, a voice states, “The driver is warned, and warned again. If necessary, the system even applies the brakes to lessen the potential impact.” A voice in the 2006 commercial states, “The driver is warned so he can react. If necessary, the system would have even applied the brakes to lessen a potential impact.”
From March to September 2006, Honda released a “What Might Happen” advertisement in some magazines. This advertisement said that “the system can react. It can give you auditory and visual warnings, a tug on the seat belt, and when necessary, even initiate strong braking.” Honda ceased mass advertising for the CMBS in 2006.
However, Honda still pursued smaller-scale marketing efforts. Honda posted on its intranet two commercials stating that the CMBS‘s “various alert stages can overlap depending on the rate of closure of your vehicle and the vehicle ahead.... The system does have limitations, and will not detect all possible accident causing situations.” These videos were viewable on kiosks at Acura dealerships, and dealers were encouraged to show them to potential customers. The parties have not
Finally, the Acura RL owner‘s manual explained that the CMBS might shut off in certain conditions, including bad weather conditions, mountainous driving, driving with the parking brake applied, and when an abnormal tire condition is detected. The owner‘s manual stated that when this automatic shut off is triggered, a “CHECK CMBS SYSTEM” message appears in the instrument panel for five seconds to alert the driver that the system has turned off.
In 2007, Michael and Janet Mazza purchased a 2007 Acura RL from an authorized Acura dealership in Orlando, Florida. That same year, Deep Kalsi bought a 2007 Acura RL from an authorized Acura dealership in Gaithersburg, Maryland. Both vehicles were equipped with the CMBS System. In December 2007, the Mazzas and Kalsi filed a class action complaint against American Honda Motor Co., Inc. (“Honda“) alleging that Honda misrepresented and concealed material information in connection with the marketing and sale of Acura RL vehicles equipped with the CMBS.
According to Plaintiffs, Honda did not warn consumers (1) that its CMBS collision avoidance system‘s three separate stages may overlap, (2) that the system may not warn drivers in time to avoid an accident, and (3) that it shuts off in bad weather. Appellees brought claims under California Law, specifically the California Unfair Competition Law (UCL),
On September 24, 2008, the district court denied Plaintiffs’ motion for class certification without prejudice. The district court requested that the Plaintiffs provide clearer notice of the proposed class and subclasses, that Honda provide more detailed information regarding the propriety of applying out-of-state law, and that Plaintiffs clearly identify the alleged omissions and/or misrepresentations. On December 16, 2008, the district court granted Plaintiffs’ renewed motion for class certification, finding that they met the requirements of
The district court held that the following common questions of law and fact satisfied Rule 23(a):
(1) whether Honda had a duty to Plaintiffs and the prospective class members to disclose that: the three stages of the CMBS System overlap; the CMBS will not warn drivers in time to avoid an
(2) whether Honda had exclusive knowledge of material facts regarding the CMBS System, facts not known to the Plaintiffs and the prospective class members before they purchased the RL equipped with the CMBS System;
(3) whether a reasonable consumer would find the omitted facts material; and
(4) whether Honda‘s omissions were likely to deceive the public.
The district court also held that common issues predominate and that California “as the forum state, has enough significant contact or aggregation of contacts to the claims asserted, given Defendants’ contacts with the state, to ensure that the choice of California law is not arbitrary or unfair to nonresident class members.” (citations omitted).
The district court concluded that California Law can be applied to all class members because Honda did not show how the differences in the laws of the various states are material, how other states have an interest in applying their laws in this case, and how these interests are implicated in this litigation. It also held that class members were entitled to an inference of reliance under California Law. It is these rulings that form the crux of the decisions material to class certification that are challenged on this appeal.
Honda sought permission to appeal immediately after the decision granting class certification. That request was granted. This case was initially argued and submitted for decision on June 9, 2010, but submission was deferred on December 7, 2010 pending the Supreme Court‘s decision in Wal-Mart Stores, Inc. v. Dukes, — U.S. —, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011). Following the Supreme Court‘s Wal-Mart decision, this appeal was resubmitted on June 22, 2011, and our decision follows.
II
“Before certifying a class, the trial court must conduct a ‘rigorous analysis’ to determine whether the party seeking certification has met the prerequisites of Rule 23.” Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186, amended 273 F.3d 1266 (9th Cir. 2001). The trial court‘s factual determinations will be reviewed for abuse of discretion so long as it remains within the framework of Rule 23. Id. When the trial court‘s application of the facts to the law “requires reference to the values that animate legal principles” we review that application de novo. US v. Hinkson, 585 F.3d 1247, 1259 (9th Cir. 2009) (en banc).
The party seeking class certification has the burden of affirmatively demonstrating that the class meets the requirements of
The Supreme Court has recently emphasized that commonality requires that the class members’ claims “depend upon a common contention” such that “determination of its truth or falsity will resolve an issue that is central to the validity of each [claim] in one stroke.” Id. The plaintiff must demonstrate “the capacity of classwide proceedings to generate common answers” to common questions of law or fact that are “apt to drive the resolution of the litigation.” Id. (quoting Nagareda, Class
Honda contends that the Plaintiffs did not meet their burden under Wal-Mart affirmatively to demonstrate that there is a common question of fact or law that can resolve important issues “in one stroke.” Honda argues that the “crucial question” of “which buyers saw or heard which advertisements” is not susceptible to common resolution. It also asserts that a showing of a “greater propensity to purchase” is “the same type of abstract question of potential peripheral significance that the Court in Dukes held was not common” under Rule 23(a)(2). But commonality only requires a single significant question of law or fact. Id. at 2556. Even assuming arguendo that we were to agree with Honda‘s “crucial question” contention, the individualized issues raised go to predominance under Rule 23(b)(3), not to whether there are common issues under Rule 23(a)(2). Honda does not challenge the district court‘s findings that common questions exist as to whether Honda had a duty to disclose or whether the allegedly omitted facts were material and misleading to the public. We hold that the Plaintiffs satisfied their limited burden under Rule 23(a)(2) to show that there are “questions of law or fact common to the class.”
III
Under Rule 23(b)(3), a plaintiff must demonstrate the superiority of maintaining a class action and show “that the questions of law or fact common to class members predominate over any questions affecting only individual members.”
Honda contends that common issues of law do not predominate because California‘s consumer protection statutes may not be applied to a nationwide class with members in 44 jurisdictions. It further contends that common issues of fact do not predominate because the court impermissibly relies on presumptions that all class members were exposed to the allegedly misleading advertising, that they relied on misleading information in making their purchasing decision, and that they were damaged as a result. We consider each argument in turn.
A. Choice of Law
Honda first argues that the district court erred by misapplying California‘s choice of law rules and certifying a nationwide class under California‘s consumer protection and unjust enrichment laws. “A federal court sitting in diversity must look to the forum state‘s choice of law rules to determine the controlling substantive law.” Zinser, 253 F.3d at 1187. We review the district court‘s choice of law determination de novo, but “review factual findings underlying a choice of law determination pursuant to the ‘clearly erroneous’ standard.” Id.
Under California‘s choice of law rules, the class action proponent bears the initial burden to show that California has “significant contact or significant aggregation of contacts” to the claims of each class member. Wash. Mut. Bank v. Superior Court, 24 Cal.4th 906, 921 (2001) (citations omitted). Such a showing is necessary to
California law may only be used on a classwide basis if “the interests of other states are not found to outweigh California‘s interest in having its law applied.” Id. (citations omitted). To determine whether the interests of other states outweigh California‘s interest, the court looks to a three-step governmental interest test:
First, the court determines whether the relevant law of each of the potentially affected jurisdictions with regard to the particular issue in question is the same or different.
Second, if there is a difference, the court examines each jurisdiction‘s interest in the application of its own law under the circumstances of the particular case to determine whether a true conflict exists.
Third, if the court finds that there is a true conflict, it carefully evaluates and compares the nature and strength of the interest of each jurisdiction in the application of its own law to determine which state‘s interest would be more impaired if its policy were subordinated to the policy of the other state, and then ultimately applies the law of the state whose interest would be more impaired if its law were not applied.
McCann v. Foster Wheeler LLC, 48 Cal.4th 68, 81-82 (2010) (citations and quotations omitted).California has a constitutionally sufficient aggregation of contacts to the claims of each putative class member in this case because Honda‘s corporate headquarters, the advertising agency that produced the allegedly fraudulent misrepresentations, and one fifth of the proposed class members are located in California. See Clothesrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605, 612-13 (1987). Honda does not dispute that there are sufficient contacts in this sense, but contends that the district court misapplied the three-step governmental interest test and erroneously concluded that California law could be applied to the whole class.2 We agree, and hold that the district court abused its discretion in certifying a class under California law that contained class members who purchased or leased their car in different jurisdictions with materially different consumer protection laws.
1) Conflict of Laws
“The fact that two or more states are involved does not itself indicate that there is a conflict of law problem.” See Wash. Mut. Bank, 24 Cal.4th at 919. A problem only arises if differences in state law are material, that is, if they make a difference in this litigation. Id. at 919-20; See In re Complaint of Bankers Trust Co., 752 F.2d 874, 882 (3d Cir. 1984) (“Any differences in [the states‘] laws must have a
With respect for the district court‘s judgment, we are persuaded that at least some differences that Honda identifies are material. For example, the California laws at issue here have no scienter requirement, whereas many other states’ consumer protection statutes do require scienter. See, e.g.,
We conclude that these are not trivial or wholly immaterial differences. In cases where a defendant acted without scienter, a scienter requirement will spell the difference between the success and failure of a claim. In cases where a plaintiff did not rely on an alleged misrepresentation, the reliance requirement will spell the difference between the success and failure of the claim. Consumer protection laws are a creature of the state in which they are fashioned. They may impose or not impose liability depending on policy choices made by state legislatures or, if legislators left a gap or ambiguity, by state supreme courts.
Moreover, even once violation is established, there are also material differences in the remedies given by state laws. Under the CLRA, a plaintiff can recover actual damages (at least $1000), an injunction, restitution, punitive damages and “any other relief that the court deems proper,”
2) Interests of Foreign Jurisdictions
It is a principle of federalism that “each State may make its own reasoned judgment about what conduct is permitted or proscribed within its borders.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 422 (2003). “[E]very state has an
In our federal system, states may permissibly differ on the extent to which they will tolerate a degree of lessened protection for consumers to create a more favorable business climate for the companies that the state seeks to attract to do business in the state. In concluding that no foreign state has “an interest in denying its citizens recovery under California‘s potentially more comprehensive consumer protection laws,” the district court erred by discounting or not recognizing each state‘s valid interest in shielding out-of-state businesses from what the state may consider to be excessive litigation. As the California‘s Supreme Court recently reiterated, each state has an interest in setting the appropriate level of liability for companies conducting business within its territory. McCann, 48 Cal.4th at 91.
Maximizing consumer and business welfare, and achieving the correct balance for society, does not inexorably favor greater consumer protection; instead, setting a baseline of corporate liability for consumer harm requires balancing the competing interests. Cf. Holloway v. Bristol-Myers Corp., 485 F.2d 986, 997 (D.C.Cir.1973) (holding, in consumer false advertising class action, that there is no private right of action under the Federal Trade Commission Act, and rejecting protests that private enforcement was needed to achieve “meaningful consumer protection” because the Act is “the product of a legislative balance which took into account not only consumer protection but also interests of the businesses affected“).
Getting the optimal balance between protecting consumers and attracting foreign businesses, with resulting increase in commerce and jobs, is not so much a policy decision committed to our federal appellate court, or to particular district courts within our circuit, as it is a decision properly to be made by the legislatures and courts of each state. More expansive consumer protection measures may mean more or greater commercial liability, which in turn may result in higher prices for consumers or a decrease in product availability. See White v. Ford Motor Co., 312 F.3d 998, 1017-18 (9th Cir.2002) (“A national company sometimes limits its sales according to variations in risk“); Amy J. Schmitz, Embracing Unconscionability‘s Safety Net Function, 58 Ala. L.Rev. 73, 109 (2006) (arguing that broad consumer protection statutes may increase prices and decrease overall consumer welfare). As it is the various states of our union that may feel the impact of such effects, it is the policy makers within those states, within their legislatures and, at least in exceptional or occasional cases where there are gaps in legislation, within their state supreme courts, who are entitled to set the proper balance and boundaries between maintaining consumer protection, on the one hand, and encouraging an attractive business climate, on the other hand.
Each of our states has an interest in balancing the range of products and prices offered to consumers with the legal protections afforded to them. Each of our states also has an interest in “being able to assure individuals and commercial entities operating within its territory that applica-
3) Which State Interest is Most Impaired
California‘s governmental interest test is designed to “[accommodate] conflicting state policies, as a problem of allocating domains of law-making power in multi-state contexts....” McCann, 48 Cal.4th at 97. It is not intended to ” ‘weigh’ the conflicting governmental interests in the sense of determining which conflicting law manifested the ‘better’ or the ‘worthier’ social policy on the specific issue....” Id. The test recognizes the importance of our most basic concepts of federalism, emphasizing the “the appropriate scope of conflicting state policies,” not evaluating their underlying wisdom. Id.
The importance of federalism when applying choice of law principles to class action certification is reinforced by the
The district court did not adequately recognize that each foreign state has an interest in applying its law to transactions within its borders and that, if California law were applied to the entire class, foreign states would be impaired in their ability to calibrate liability to foster commerce. That this concept was missed or given inadequate weight was error. The district court‘s reasoning elevated all states’ interests in consumer protection to a superordinate level, while ignoring or giving too little attention to each state‘s interest in promoting business. This presents a mode of analysis that the Class Action Fairness Act was aimed at stopping. See Findings, Class Action Fairness Act § 2(a)(4), Pub.L. No. 109-2, 119 Stat. 4, 5 (2005) (categorizing as an “abuse[]” of the class action system the practice of state courts “making judgments that impose their view of the law on other States and bind the rights of the residents of those States“).
California recognizes that “with respect to regulating or affecting conduct within its borders, the place of the wrong has the predominant interest.” See Hernandez v. Burger, 102 Cal.App.3d 795, 802 (1980), cited with approval by Abogados v. AT & T, Inc., 223 F.3d 932, 935 (9th Cir.2000). California considers the “place of the wrong” to be the state where the last event necessary to make the actor liable occurred. See McCann, 48 Cal.4th at 94 n. 12 (pointing out that the geographic location of an omission is the place of the transaction where it should have been disclosed); Zinn v. Ex-Cell-O Corp., 148 Cal.App.2d 56, 80 n. 6, 306 P.2d 1017 (1957) (concluding in fraud case that the place of the wrong was the state where the misrepresentations were communicated to
Conversely, California‘s interest in applying its law to residents of foreign states is attenuated. See Edgar v. MITE Corp., 457 U.S. 624, 644 (1982) (“While protecting local investors is plainly a legitimate state objective, the State has no legitimate interest in protecting nonresident shareholders.” (emphasis added)). Plaintiffs contend that California “is connected to both sides of the dispute,” with interests both in protecting it citizens and in regulating Honda, a California corporation. We recognize that California has an interest in regulating those who do business within its state boundaries, and foreign companies located there, but we disagree with the dissent that applying California law to the claims of foreign residents concerning acts that took place in other states where cars were purchased or leased is necessary to achieve that interest in this case. We also note that Plaintiffs’ argument that California law is the best choice for this nationwide class is based on a false premise that one state‘s law must be chosen to apply to all 44 jurisdictions.
Under the facts and circumstances of this case, we hold that each class member‘s consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place. Accordingly, we vacate the district court‘s class certification order and remand for further proceedings consistent with this opinion. We express no view whether on remand it would be correct to certify a smaller class containing only those who purchased or leased Acura RLs in California, or to certify a class with members more broadly but with subclasses for class members in different states, with different jury instruction for materially different bodies of state law. See, e.g., In re Computer Memories Sec. Litig., 111 F.R.D. 675, 685-86 (N.D.Cal.1986).
B) Predominance of Common Factual Questions
Honda contends that common issues of fact do not predominate because this case necessarily involves an individualized determination as to whether class members were exposed to misleading advertisements and whether they relied on those advertisements in purchasing or leasing cars with a CMBS. Honda further argues that presuming common exposure and reliance sweep in class members who did not suffer an injury in fact, and thus do not meet Article III standing requirements. We hold that California class members have Article III standing but that the district court abused its discretion in finding that common issues of fact predominate because the small scale of the advertising campaign does not support a presumption of reliance.
1) Standing
“[N]o class may be certified that contains members lacking Article III standing.” Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir.2006). “[S]tanding requires that (1) the plaintiff suffered an injury in fact (2) the injury is fairly traceable to the challenged conduct, and (3) the injury is likely to be redressed by a favorable decision.” Bates v. United Par-cel Svc., Inc., 511 F.3d 974, 985 (9th Cir. 2007) (quotations omitted). Under California‘s UCL, restitution is available to absent class members without individualized proof of deception, reliance, or injury. In re Tobacco II Cases, 46 Cal.4th 298, 320 (2009). Honda contends that this means the class includes individuals who have no injury in fact, and therefore no Article III standing.
Plaintiffs contend that class members paid more for the CMBS than they otherwise would have paid, or bought it when they otherwise would not have done so, because Honda made deceptive claims and failed to disclose the system‘s limitations. To the extent that class members were relieved of their money by Honda‘s deceptive conduct—as Plaintiffs allege—they have suffered an “injury in fact.” Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1021 (9th Cir.2011). Although it is not a simple or a clear cut matter, we conclude, in the light of our prior precedent, that Honda‘s objection “that state law gives a right to ‘monetary relief to a citizen suing under it’ without a more particularized proof of injury and causation ... is not enough to preclude class standing here.” Id. (quoting Cantrell v. City of Long Beach, 241 F.3d 674, 684 (9th Cir. 2001)).
2) Reliance
While we reject Honda‘s contention that Tobacco II impermissibly allows a class to “include members who suffered no injury in fact” in violation of Article III, we agree with Honda‘s contention that the misrepresentations at issue here do not justify a presumption of reliance. This is so primarily because it is likely that many class members were never exposed to the allegedly misleading advertisements, insofar as advertising of the challenged system was very limited. Davis-Miller v. Automobile Club of Southern California, 201 Cal.App.4th 106, 125, 134 Cal.Rptr.3d 551 (2011) (“An inference of classwide reliance cannot be made where there is no evidence that the allegedly false representations were uniformly made to all members of the proposed class.“); Cohen v. DIRECTV, Inc., 178 Cal.App.4th 966, 980 (2009) (“[California law does not] authorize an award ... on behalf of a consumer who was never exposed in any way to an allegedly wrongful business practice.“). The district court found that an inference of reliance was appropriate, relying on Massachusetts Mutual Life Insurance Co. v. Superior Court, 97 Cal.App.4th 1282, 119 Cal.Rptr.2d 190 (Cal.App.4th 2002). In doing so, the court found it significant that Honda‘s advertisements were allegedly misleading because of the information they omitted, rather than the information they claimed, and that while the omitted information may have been available, there was no evidence that customers received it.
In Mass. Mutual, plaintiffs were allegedly induced to buy “vanishing premium” life insurance policies through sales presentations that misrepresented the extent to which premiums would decrease over time by failing to disclose that Mass Mutual intended to “ratchet down” the discretionary dividends it paid to offset premium costs. Id. at 1286. The California Court of Appeals found that an inference of reliance was proper under these facts, in part because the information “provided to prospective purchasers appears to have been broadly disseminated.” Id. at 1294. After the district court‘s decision, the California Supreme court reconfirmed that class members do not need to demonstrate individualized reliance, and that Proposition 64 imposes its reliance requirements only on the named plaintiff, not unnamed
Honda‘s product brochures and TV commercials fall short of the “extensive and long-term [fraudulent] advertising campaign” at issue in Tobacco II, 46 Cal.4th at 328, and this difference is meaningful. And while Honda might have been more elaborate and diligent in disclosing the limitations of the CMBS system, its advertising materials do not deny that limitations exist. A presumption of reliance does not arise when class members “were exposed to quite disparate information from various representatives of the defendant.” See Stearns, 655 F.3d at 1020. California courts have recognized that Tobacco II does not allow “a consumer who was never exposed to an alleged false or misleading advertising ... campaign” to recover damages under California‘s UCL. Pfizer Inc. v. Superior Court, 182 Cal.App.4th 622, 632 (2010); Davis-Miller, 201 Cal.App.4th at 124-25. For everyone in the class to have been exposed to the omissions, as the dissent claims, it is necessary for everyone in the class to have viewed the allegedly misleading advertising. Here the limited scope of that advertising makes it unreasonable to assume that all class members viewed it. Pfizer Inc., 182 Cal.App.4th at 633-34.4
In 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. The relevant class must also exclude those members who learned of the CMBS‘s allegedly omitted limitations before they purchased or leased the CMBS system. The district court certified a class that included all persons who purchased or leased an Acura RL with the CMBS between August 2005 and class certification. This class is overbroad. We vacate the class certification decision on this ground because common questions of fact do not predominate where an individualized case must be made for each member showing reliance.
IV
Because the law of multiple jurisdictions applies here to any nationwide class of purchasers or lessees of Acuras including a CMBS system, variances in state law overwhelm common issues and preclude predominance for a single nationwide class. And even if the class was restricted only to those who purchased or leased their car in California, common issues of fact would not predominate in the class as currently defined because it almost certainly includes members who were not exposed to, and therefore could not have relied on, Honda‘s allegedly misleading advertising material. We vacate the district court‘s class certification and remand for further proceedings consistent with this opinion. As we make clear above, we express no opinion whether a differently defined class may meet the requirements of
The Order Granting Plaintiffs’ Renewed Motion for Class Certification is VACATED and the matter is remanded for further proceedings consistent with this opinion.
D.W. NELSON, Senior Circuit Judge, dissenting:
I respectfully dissent. Because common factual and legal issues predominate, I would affirm the district court.
First, the majority holds that the facts do not justify a presumption of reliance. Majority Opinion at 584-96. I disagree. Both California‘s
Next, I concur with the majority that Honda has sufficient contacts with California to satisfy constitutional concerns. Allstate Ins. Co. v. Hague, 449 U.S. 302, 310-11 (1981); Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224, 110 Cal.Rptr.2d 145, 159 (2001). Honda, a California corporation, has made Torrance, California its principal place of business and its corporate headquarters for sales, marketing, research and development. Honda hired an advertising agency in Santa Monica, California to create print, radio and television ads for the CMBS system and an advertising agency in Culver City, California for its internet-based ads.
I disagree, however, with the majority‘s choice of law analysis pursuant to California‘s three-step governmental interest test. McCann v. Foster Wheeler LLC, 48 Cal.4th 68, 105 Cal.Rptr.3d 378, 225 P.3d 516, 527 (2010). First, the majority concludes that material differences exist between California law and that of the 43 jurisdictions in which class members reside. Majority Opinion at 591-92. I find only one potentially material difference: Louisiana, Georgia, Mississippi, Kentucky,
The majority holds that applying California law to a nationwide class would discount each state‘s interest in achieving an optimal balance between consumer protection and business friendliness. Majority Opinion at 592-93. But pro-business legislation does not speak to the specific interest states have in imposing their laws on this litigation. Honda has not shown how a state‘s general interest in prohibiting class actions brought under its own consumer protection laws translates into an interest in having its laws apply to this litigation. Unmistakably, California has a keen interest in deterring California corporations, with their principal places of business in California, from engaging in tortious conduct within the state. Clothesrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605, 236 Cal.Rptr. 605, 609 (1987) (“California‘s interest in deterring fraudulent conduct by businesses headquartered within its borders and protecting consumers from fraudulent misrepresentations emanating from California would override any possible interest of any other state in application of its own laws to its residents’ claims.“).
In assessing “which state‘s interests would be more impaired if its policy were subordinated to the policy of the other state,” Clothesrigger, 236 Cal.Rptr. at 609, the majority concludes both that applying California law would impair foreign states’ ability to foster commerce and that California has an attenuated interest in applying its law to nonresidents, Majority Opinion at 593-94. I strongly disagree. Each state with a material conflict has an interest in having its consumer protection laws apply to transactions taking place within that state‘s borders. However, California‘s interest would be most significantly impaired if its laws were not applied to this litigation. Honda is incorporated and headquartered in California; the advertisements at issue emanated from the state. California has a compelling interest in regulating the conduct of corporations operating within the state and availing themselves of the state‘s privileges. Clothesrigger, 236 Cal.Rptr. at 614; Wershba, 110 Cal.Rptr.2d at 159 (noting that
Thus, California law should govern. In fact, California courts themselves have held that “a California court may properly apply the same California statutes at issue here to non-California members of a nationwide class where the defendant is a California corporation and some or all of the challenged conduct emanates from California.” Wershba, 110 Cal.Rptr.2d at 160; see also Clothesrigger, 236 Cal.Rptr. at 615-16 (applying California law to nationwide class).
The majority‘s holding will prove devastating to consumers. Individual claimants will not bring actions to recover the $4,000 paid for the CMBS systems. Even if consumers did pursue these claims, and even if these claims proved successful, they “would not only unnecessarily burden the
The district court did not abuse its discretion in certifying a nationwide class to which California law applies. I respectfully dissent.