May 24, 2013
ROBERT A. WALLER, JR., on behalf of himself and all others similarly situated, Plaintiff,
HEWLETT-PACKARD COMPANY, etc., et al., Defendants.
ORDER STAYING CASE
LARRY ALAN BURNS, District Judge.
Now pending before the Court is Waller's motion for class certification. After considering the parties' briefs and familiarizing itself with the relevant caselaw, the Court is inclined to stay this case pending the appeal of the denial of class certification in O'Shea v. Epson America, Inc., Case No. 9-CV-8063 (C.D. Cal.), Doc. No. 596.
Front and center here is the question whether unnamed class members in a putative UCL class action must satisfy Article III standing requirements when that class action is in federal court. There is no unambiguous, controlling Ninth Circuit authority on that question, but in the wake of Stearns v. Ticketmaster Corp., 655 F.3d 1013 (9th Cir. 2011), district courts in California have drifted in different directions. In O'Shea, for example, one judge in the Central District of California held that "absent class members must satisfy the requirements of Article III." 2011 WL 4352458 at *10. But in Bruno v. Quten Research Institute, LLC, 280 F.R.D. 524 (C.D. Cal. 2011), another judge in the Central District held that "the Ninth Circuit in Stearns did not subtly announce a new rule requiring courts to analyze unnamed class members' standing." Id. at 533.
After both of those decisions, the Ninth Circuit did hold in a putative UCL class action that "[n]o class may be certified that contains members lacking Article III standing, " Mazza v. American Honda Motor Co., Inc., 666 F.3d 581, 594 (9th Cir. 2012), but there is an ambiguity in the opinion, at least as the Court reads it. It explains that standing requires an actual injury that's traceable to the challenged conduct, but then seems to find class standing based on injury alone, namely the fact that consumers allegedly paid more for a good than it was really worth to them. Id. at 595. The opinion continues, though, to the question whether a presumption of reliance is justified, and it's not clear whether this is simply the traceability prong of the standing requirement, or some free-standing requirement that the Court assesses in the Rule 23(b)(3) predominance analysis. See id. at 595-96. If the latter, where exactly does that reliance requirement come from, given that a California UCL claim doesn't require it except for the named plaintiff in a class action? (The answer may be that Mazza also involved a claim under the Consumer Legal Remedies Act, which does require an additional showing of reliance. Id. at 595.)
On November 15, 2011, the Ninth Circuit granted a petition in O'Shea to appeal the court's order denying class certification. On this appeal, the Ninth Circuit will address head-on the question on which O'Shea and Bruno are split, and which, even after Mazza, is the source of much confusion here and in other putative UCL class actions that land in federal court. If unnamed plaintiffs have to satisfy Article III standing requirements simply because a case is in federal court - requirements, to be clear, that aren't present in state court - Waller's motion for class certification is in serious trouble. Article III standing requires an injury that's caused by the alleged misconduct, Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992), and it will likely be impossible to show causation on a class-wide basis, at least here. That is, even if Waller can show that the alleged injury is the same - the value differential between the SimpleSave consumers bought and a SimpleSave that truly backs up everything, automatically - he'll have a very hard time showing that this injury, for all purchasers, was caused by alleged misrepresentations on the packaging. See Mazza, 666 F.3d at 596 (suggesting that reliance may be presumed only where all class members were actually exposed to the alleged misrepresentations and guided by them). Did they all read the alleged misrepresentations? Did they all buy the SimpleSave because of them? Individual considerations will necessarily predominate in answering those questions.
The Court's intuition, for what it is worth, is that O'Shea is probably right and the Court must take Mazza at its word, and this putative class cannot satisfy Rule 23(b)(3). But the proper course might then be to either dismiss the class claims without prejudice or actually remand this case, if the Court has made a determination that it cannot proceed as a class action here on standing grounds.
Removal of this case was no doubt proper, as the Court has held ( see Doc Nos. 29, 68), and the Court acknowledges that the Ninth Circuit has held that the denial of class certification doesn't divest a district court of jurisdiction under CAFA. See United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union, AFL-CIO, CLC v. Shell Oil Co., 602 F.3d 1087, 1092 (9th Cir. 2010) ("If a defendant properly removed a putative class action at the get-go, a district court's subsequent denial of Rule 23 class certification does not divest the court of jurisdiction, and it should not remand the case to state court.").
But Shell Oil also recognized an exception when courts lacked jurisdiction to begin with - and standing is jurisdictional. Id. at 1092 n. 2; Doe No. 1 v. Reed, 697 F.3d 1235, 1238 (9th Cir. 2012). Running with these principles, at least one district court has held that when class certification is denied on Article III standing grounds, rather than for failure to satisfy Rule 23, the court lacks subject matter jurisdiction over the class claims and can dismiss them without prejudice. Robinson v. Hornell Brewing Co., 2012 WL 6213777 at *8 (D.N.J. Dec. 13, 2012). Another district court has actually remanded a case that was removed under CAFA when it determined that the plaintiff lacked Article III standing. Range v. Cincinnati Life Ins. Co., 2012 WL 1035728 (N.D. Ohio 2012). Whatever the result, it doesn't seem to be within the spirit and purpose of CAFA that a defendant can remove a case to federal court and then seize on federal law to insist that plaintiffs lack standing to go forward.
This is a vexing issue, and it's one the Court wants to get right. The Ninth Circuit will speak to it definitively when it considers the class certification denial in O'Shea, which, like this case, involves UCL and FAL claims only and was originally filed in state court and then removed. If the parties care to brief this issue, they may file one supplemental brief each, no more than 5 pages in length, within two weeks of the date this Order is entered. This case is otherwise stayed until the Court can proceed under the guidance of the Ninth Circuit's opinion in O'Shea.
IT IS SO ORDERED.